Positive Change Will Come from Hilcorp in Prudhoe Bay
Aerial view of Prudhoe Bay
The recent announcement that BP is selling its Prudhoe Bay assets to Hilcorp Alaska may have surprised Anchorage and Alaska, but AEDC believes in the industry’s strength, Hilcorp’s efficient business model, and that positive outcomes will ultimately result from this change.
This is far from the death knell for Alaska’s oil and gas industry. It’s a transition to a different business model than what we’re used to. Hilcorp didn’t buy this asset to take it down to zero. Hilcorp’s investment is indicative of confidence in its ability to produce additional revenue.
When Hilcorp first came into the oil and gas scene in Cook Inlet, we saw a production and investment renaissance. Hilcorp has ramped up exploration and production plans in Cook Inlet over the last several years, relying heavily on new and existing professional services firms, resulting in a nice bump in the economy on the Kenai Peninsula. We may be able to expect some of the same in the North Slope.
Before the country’s recession kicked in, the US was at an all-time record high oil production of about 9.6 million barrels a day. The United States had over 525,000 people employed nationwide in the oil and gas extraction industry for 2015. At the bottom of that recession, that number dropped dramatically, and the workforce dropped to just over 350,000. The national oil industry recession has ended, and oil production is projected to rise to a new record of 12.2 million barrels per day in 2019; however, the oil and gas workforce has only risen to about 436,000. With new technology, production is a more efficient process. The Hilcorp business model has embraced this new way of doing things. With this changing business model, and with Hilcorp leading the way, other mid-size exploration and development companies may be attracted to Alaska. From Hilcorp to ConocoPhillips, Oil Search and more, we are seeing a lot of activity going on in the North Slope and I believe we will see a solid turnaround there in the next three to five years.
Here in Anchorage, I see opportunity. Looking at AEDC research and reports and a talented, skilled labor pool at the BP headquarters, I see a match between needed skills and available workforce. The city has seen a net loss of about 20,000 people in the last five years, between people moving out of Anchorage to the Lower 48 and the number of new people coming in from the Lower 48. This net loss of families and workforce to the Lower 48 leads to a lack of qualified candidates to fill open jobs. I also hear from employers that many other industries are seeing a skillset shortage.
Where does that leave us? A fresh opportunity for skilled workforce and employers, both in the oil industry and in other sectors of the economy including project management, logistics, accounting, and HR to name a few, who may be able to tap into a significant talent pool to fill their openings.
While I am sorry to lose BP, they, too, are transitioning to the industry’s new realities. A legacy field with declining performance is not the right fit for a major like BP anymore.
There is much to be applauded in what the company has done for Alaska, the revenues it has generated, the employment it has provided for Alaskan families, the investments it has made in our community, and the way that BP employees, volunteerism, and philanthropy have become part of the fabric of our state. We’re going to lose some of those people, and it saddens me that friends I’ve known for many years will be moving to other parts of the world.
I want to close with my deep gratitude to BP for its contributions to Anchorage, Alaska, and to AEDC over its long history in the state. BP has been a tremendous partner with Alaska over the last sixty years.
But I believe in Anchorage, I believe in the change that Hilcorp brings to the table, in this industry as a whole and I look forward to the transition ahead. We’re going to see an evolution in this industry over the coming years—and a resultant change in employment—that I’ll be watching closely.
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