Headlamp – “It ain’t going to happen.” Headlamp hopes not – AOGCC overreaches with new idea

“It ain’t going to happen.” Headlamp hopes not – AOGCC overreaches with new idea. An Alaska regulator has asked the Legislature to make sure oil companies clean up old wells, even after the wells are sold to a different company. Cathy Foerster of the Alaska Oil and Gas Conservation Commission testified before the Senate Resources Committee on Monday, Alaska’s Energy Desk reported. Foerster said it’s becoming more common for smaller oil companies to operate in Alaska — and those companies may be more financially unstable. Forester warned that if a big oil field such as Prudhoe Bay is sold to a smaller company that goes bankrupt and can’t pay for cleanup, it could cost the state billions of dollars. She said the state currently has a $200,000 bond to cover the cost of plugging and abandoning all the wells at Prudhoe Bay. “For $200,000 we couldn’t even pay for the engineering study that would give us the estimate on what the true cost is to plug all of those wells,” Foerster said. “So, we’re in a bad situation on having adequate bonding for our wells, and we’re working it.” Forester gave the example of Aurora Gas, which declared bankruptcy last year. Forester said the company is unable to pay to plug and abandon its wells, three of which are on state land, making the state financially responsible for cleaning them up. “Aurora Gas doesn’t exist anymore, we cannot go back to Aurora Gas and ask them for the money to (plug and abandon) those wells,” she said. “It ain’t going to happen.”

The last couple years have been tough for Alaska contractors. While it took about two years to really be felt as money on large multi-year and preplanned projects continued to be spent, the precipitous fall of oil prices in late 2014 led to construction spending declines of 18 percent in 2016 and 10 percent in 2017 year-over-year. Not only did the price collapse hit contractors working in the state’s oil fields, but state capital spending has all-but disappeared since the oil revenues the State of Alaska relies on dried up as well. Similarly, Alaska’s construction industry workforce has declined by 17 percent since peaking in 2014 with a year average of 17,800 jobs, according to the state Labor Department. Last year the industry averaged 14,900 workers. It’s worth noting that those figures do not reflect construction jobs classified within the oil and gas sector, which has seen its workforce shrink by 5,000 jobs, or more than 30 percent, over the same period. However, there are signs of a turnaround. The 2018 Alaska Construction Spending Forecast, compiled by the University of Alaska Anchorage Institute of Social and Economic Research estimates “on the street” spending will increase 4 percent to more than $6.5 billion this year. Authors Scott Goldsmith and Linda Leask wrote in the report for the Association of General Contractors-Alaska that the modest increase will be driven by a rebound in spending by oil and gas companies that will more than offset continued declines in infrastructure investment by other sectors.

China is our NOTP, not our BFF. Your Alaska Link had the chance to speak with the Anchorage Economic Development Corporation (AEDC), following yesterday’s announcement by Governor Bill Walker, that the 49th State is planning to advance international trade collaborations with China. AEDC Logistics Business Development Director Will Kyzer described, “China is actually Alaska’s number one trading partner, and with the significant growth that we are seeing in China as a developing market, there’s really a lot of opportunity there.” As Alaska is strategically located in the global arena, Kyzer added, “One of the more significant areas that we are working on right now is a partnership called the Alaska AeroNexus Alliance…we are working to pursue some new opportunities, that haven’t really been realized here locally.” In our interview above, Anchorage Economic Development Corporation Logistics Business Development Director Will Kyzer details growing international trade, new markets, untapped financial sources and more.

2025 more demand than supply for LNG? Chevron Corp said on Tuesday it expected supply shortage in the global liquefied natural gas (LNG) market by around 2025, echoing comments made last month by top LNG trader Royal Dutch Shell. Demand for natural gas, which burns cleaner than coal and oil, has surged as countries such as China look to curb environmental pollution. Chevron, owner of the giant Gorgon and Wheatstone LNG projects in Australia, said it expects global demand to be nearly 600 million metric tonne per annum (mmtpa) by 2035, while supply could be just about half of that. “China’s demand is increasing significantly – they’ve had a very active program to move off of coal in heating industrial applications, and that’s pulled on LNG,” Pierre Breber, EVP -downstream at Chevron, said during the company’s analyst day, when asked about spot LNG prices. China imported record levels of LNG in January, as the world’s second-largest economy shored up supplies ahead of the Lunar New Year celebrations. Shell in February estimated that more than $200 billion of investments in LNG is needed to meet the boom in demand by 2030. The global LNG market is set to continue its rapid expansion into 2020 as facilities approved for construction in the first half of the decade come on line. However, a decline in spending in the sector since 2014 will create a supply gap from the mid-2020s unless new investments emerge, Shell said in its 2018 LNG Outlook.

First Reads:

Oil sector leads construction spending rebound
Alaska Journal of Commerce, Elwood Brehmer, March 6, 2018

Regulator wants to hold oil companies accountable for spills
Associated Press, March 7, 2018

AEDC: “China Is Alaska’s #1 Trading Partner”
Your Alaska Link, Maria Athens, March 6, 2018

Chevron expects LNG supply shortage by 2025
Reuters, John Benny, March 6, 2018