Morning Headlamp — Point Thomson begins production

Just the beginning. On Friday, ExxonMobil’s Point Thomson began oil production. About 5,000 barrels daily of condensate — the light oil that’s similar to kerosene or diesel — is being dripped from 100 million cubic feet of natural gas. That amount of gas – almost half the gas used in Southcentral Alaska on an average day — will be extracted daily, then pumped back into the ground after the light oil has been extracted. Aaron Stryk, a media relations adviser for ExxonMobil, said production has not yet begun at a well on the western section of the field. That will come on line in a few months, doubling the amount of gas cycling that will occur, and pushing light oil production to 10,000 barrels. “The primary course is planning for gas expansion to underpin the development of the Alaska LNG project,” said Stryk. This is great news for Alaska’s oil and gas industry! Headlamp applauds industry leaders for continuing to develop despite legislative threats to overall progress.

The Alaska Dispatch News profiled Deral Wise, a former electrical designer for CH2M Hill on a North Slope oil field project who was recently laid off. Wise is one of hundreds of casualties who have lost their job in the Alaska oil patch in the last year, a victim of low oil prices that have forced companies to slash projects and personnel to survive. The Alaska Department of Labor and Workforce Development (AKDOL) expects layoffs in the state’s oil and gas industry to surpass 2,000 by the end of this year –coming off record-high employment levels of 14,800 in March 2015. The DOL response to job loss has been to implement more restrictive hiring policies, instead of promoting policies that would increase jobs. Alaska’s oil and gas industry consistently maintains a 75-80% Alaska hire rate. With lawmakers already threatening the industry with aggressive tax proposals, the focus should be on making the pie bigger instead of getting a piece of a shrinking pie. 

Think critically before acting irrationally. In the current low-price environment, Alaska’s revenue sharing program is at serious risk. Faced with a $4.1 billion budget deficit, the Alaska Legislature has restructured the revenue-sharing program to pay out half the amount held in the fund since it was established in 2008. In places like Yakutat, an isolated Southeast community of about 600 people on the coastal lowlands of the Gulf of Alaska, revenue sharing makes up 16 percent of the city’s $2.5 million budget. City manager Jon Erickson said he’s having a hard time writing a budget without knowing whether there will be a stable funding source for the revenue-sharing program. State payments to Alaska communities date back decades, but the most recent version of the program was established in 2008 and drew from oil tax revenue, hence the name “revenue-sharing.” When Alaska’s oil industry is hurting, Alaska is hurting. There are hundreds of communities that depend on programs infused with oil revenue to maintain their way of life. While we can’t control macroeconomic forces, we can control how we respond to them — Alaska’s lawmakers need to think critically about the damage increased taxation on the oil and gas industry would do to communities across the state.

 

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First Reads

After decades of failed attempts, oil production begins at Point Thomson
Alaska Dispatch News, Alex DeMarban, April 22, 2016

Laid-off oil workers say Alaska jobs should be protected over Outsiders
Alaska Dispatch News, Alex DeMarban, April 24, 2016

Decline of Alaska revenue sharing leaves communities vulnerable
Alaska Dispatch News, Devin Kelly, April 22, 2016

ExxonMobil Ramps Up NatGas Production at Alaska’s Point Thomson
Natural Gas Intel, Carolyn Davis, April 22, 2016

Legislature may soon need new venue for overtime lawmaking, speaker says
KTUU, Austin Baird, April 25, 2016