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Petroleum News: State forecasts two more years of growth

State forecasts two more years of growth

Department of Labor: jobs added in Alaska for 18 consecutive years; moderate growth should continue this year and next

Petroleum News

The Alaska Department of Labor and Workforce Development expects Alaska’s 18 consecutive years of economic growth to extend through 20 years, adding 2006 and 2007 onto the growth period at moderate rates, 1.7 percent this year and 1.5 percent in 2007.

Department economist Dan Robinson, writing in the May issue of “Alaska Economic Trends,” said “high oil prices, a generally favorable national and international economy and significant federal spending in Alaska practically assure continued job growth over the forecast period.”

In the natural resources area Robinson noted that oil companies have been slow to add jobs “because of past price volatility and the state’s relatively high costs,” but have added 500 jobs in 2005, for a total of 8,700 oil and gas jobs in the state last year. That total was 200 fewer than in 2002 and 800 fewer than in 2001, he said.

The University of Alaska’s Institute of Social and Economic Research is forecasting construction project spending by the oil and gas industry to grow in 2006 and 2007, Robinson said, with the 2006 growth forecast at 19 percent. Drilling is also expected to increase, with total wells growing from 243 in 2005 to 257 in 2006 and total well footage from 1.58 million feet in 2005 to 1.67 million feet in 2006.

BP Exploration (Alaska) has said it plans to hire up to 200 new workers in 2006, Shell Oil has returned to Alaska and has said it plans to begin drilling in 2007 and there is strong interest from a number of smaller producers, he said.

Although production continues to decline, employment in the oil and gas industry is expected to grow by 300 in 2006 and by an additional 200 in 2007.

Anchorage: upswing to continue

Department economist Neal Fried said the Anchorage growth cycle has now stretched 17 years and while the city’s economy is not likely to grow forever, another year of growth “almost appears as certain as the theory of thermodynamics.”

Growth rates are expected to be 1.8 percent in 2006 and 1.7 percent in 2007, he said, close to the 10-year 2 percent annual average employment growth rate.

Fried said high oil prices, the healthy national economy, low interest rates, a positive outlook for the visitor industry, a healthy flow of federal dollars, international air cargo expansion, state revenue surpluses, the emerging mining industry, the possibility of a gas pipeline on the horizon and an overall sense of optimism are among the factors favoring continued growth in Anchorage’s economy.

The city is economically vulnerable in the event of a collapse in oil prices, a dramatic drop in federal dollars “or something beyond our current imagination,” he said.

Fried said with high oil prices the forecast for employment in the oil and gas industry is “for modest growth in Anchorage and more rapid growth on the North Slope.” He called the increase in oil industry jobs in Anchorage modest, up 100 from 2005 to 2006 for a 1.6 percent increase to 2,100, but he said the direction is “significant.”

“Most of the players are planning some upswing in development work during the forecast period (2006-07),” Fried said, including satellite and West Sak development work by ConocoPhillips, with an increase in spending of 8 percent in 2006.

BP is planning to hire new workers, some of whom will be based in Anchorage, some for existing North Slope projects, some for field development work and some to replace retirees.

Fairbanks: resource employment could decline

Fairbanks is also expected to see two more years of employment growth, said department economist Brigitta Windisch-Cole, with up to 500 new jobs expected both this year and next, for an annual growth rate of 1.3 percent in those years.

Natural resource jobs, however, are expected to decline since the automation of much of the trans-Alaska pipeline as part of the Alyeska Pipeline Service Co. reconfiguration will mean fewer operating jobs at the pump stations, hence fewer workers needed.

Job losses are expected in Fairbanks in 2007 after the reconfiguration project is completed among contract workers specializing in oil field services.

Editor’s note: ISER’s 2006 construction spending forecast for Alaska was done for the Construction Industry Progress Fund (CIPF) and the Associated General Contractors of Alaska (AGC). It is the third such annual report. CIPF and AGC published the 2006 forecast earlier this year.

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