Headlamp – Is the worst of the recession over?

Is the worst over? At CRW Engineering Group in Anchorage, managing partner Mike Rabe said his firm has been scrambling for work. The projects available to chase the last couple of years have been on the small side, he said, often focused more on maintenance and improvements rather than entirely new ventures. “We’ve had to work harder than ever. Competition is high and there’s not a lot of work out there,” Rabe said. As a result, his firm spends more money and time up front to become more knowledgeable about the projects it tries to win. There haven’t been layoffs, Rabe said, but profits are down. About two years into Alaska’s recession, many businesses are still feeling the pain. Almost every industry continues to lose jobs, according to preliminary job estimates from the Alaska Department of Labor and Workforce Development. But the state’s over-the-year job losses have gradually slowed this year, and some economists cautiously say that the worst hit of the current downturn may have already passed.

Like a phoenix from the ashes… As another fevered push to open the pristine Arctic National Wildlife Refuge to energy exploration collapsed on the Senate floor in December 2005, Ted Stevens, then the powerful and wily Republican senator from Alaska, declared it “the saddest day of my life.” At that moment, it looked as though the decades-long fight over drilling in 1.5 million acres of the remote refuge could finally be at an end. Republicans essentially gave up for the remainder of the George W. Bush administration after Democrats won control of Congress, and the drilling proposal had no chance during the Obama years, so it virtually disappeared as a topic of congressional conversation.

Growth in Russian Arctic shipping. The first shipment of LNG from Sabetta on Friday marks the onset of a period of big growth in Russian Arctic shipping. The Christophe de Margerie carried some 172,600 cubic meters of LNG as it set out from Sabetta, the new big port on the northern tip of the Yamal Peninsula. It is the maiden trip from Russia’s Arctic flagship project, the Yamal LNG, and the ship is expected to have an eastbound course towards the markets in Asia. The Christophe de Margerie has ice-protection level Arc7 and is capable of independently breaking through up to 2.1 meters of ice. It is the first of 15 ships of its kind to serve the new natural gas project. The tanker has an engine power of 45 MW, which is “comparable with a nuclear powered icebreaker,” natural gas company Novatek says.

Slow but steady? The oil and gas industry will continue its slow recovery as upstream companies increase production, helping the midstream and services businesses as well, according to Moody’s 2018 outlook. Excess supply will continue to dampen oil prices in the coming year. Natural gas prices, on the other hand, will benefit from higher demand, but price gains will still be limited. “Prolonged oversupply will constrain oil prices in the next 1-2 years, though [Organization of Petroleum Exporting Countries]-led production cuts have now stabilized around price-supportive levels,” said Steve Wood, Moody’s managing director for oil and gas. “We expect prices to remain within the $40-60/bbl band through 2019, assuming continued compliance with global production targets.”

Senator Hughes on the budget. Calling on all Alaskans! If you don’t read anything else political between now and the next legislative session in January, please bear through the numbers and read this piece. You will be shocked but you also will be well-equipped to answer the questions above. What does it all mean? Where are we? Egads. If we’ve really cut 44 percent (we haven’t) then we must be down to bare bones (we aren’t). Consider this: Although our state has unique challenges, is larger than the state of Idaho, and has fewer local governments chipping in, our per capita spending is four times that of Idaho. You read that right: four times. The truth is, we can still make reductions without sacrificing excellent, essential services and in doing so, avoid asking Alaskans to pull hard-earned dollars from their wallets to pay for inefficiencies and nice but unnecessary programs.

First Reads:

Alaska’s economy is still struggling, but the worst may have passed
Anchorage Daily News, Annie Zak, December 10, 2017

How Arctic Drilling, Stymied for Decades, Made Surprise Return in Tax Bill
New York Times, Carl Hulse, December 9, 2017

First Yamal LNG shipment means a new era of shipping on Russia’s Northern Sea Route
Independent Barents Observer, Atle Staalesen, December 11, 2017

Moody’s: Oil, gas industry to continue recovery in 2018
Oil & Gas Journal, Oil & Gas Journal Editors, December 8, 2017

Have we cut state budget enough? Must Alaskans pony up? No.
Anchorage Daily News, Sen. Shelley Hughes, December 10, 2017