The president of Alaska’s Oil and Gas Association spoke to the Kenai Chamber of Commerce on Wednesday to share the state of the industry in the wake of an economic downturn caused by the COVID-19 pandemic.
Kara Moriarty, president of AOGA, described the tumultuous fluctuation in oil prices this year. At the beginning of 2020 oil was nearly at $70 per barrel, Moriarty said, but by the end of March oil prices had dropped into the negatives for the first time in history due to an international price war combined with a drop in the global demand and an excess of supply.
“Obviously even before the pandemic hit in the middle of March, the oil industry was seeing prices start to decline because of this global tussle, if you will, between Russia and Saudi Arabia,” Moriarty said during her presentation.
With the steep drop in the price of oil came significant job loss in the oil and gas sector of Alaska’s economy. The oil industry lost about 17% of its workforce between January and September of 2020, according to data from the Alaska Department of Labor. Moriarty said that current employment levels in the oil industry are the lowest they’ve been in 20 years, and any future increase in employment would be heavily dependent upon the price of oil.
Oil prices have stayed between $38 and $44 per barrel since the end of June, but Moriarty said that the U.S. Energy Information Administration does not anticipate the price of oil going above $50 per barrel for another eight to 10 years.
When asked if that price would be high enough for the industry to return to previous levels of employment and production, Moriarty said it was too soon to tell.
“Any time the industry goes through a crash, it gets more efficient,” Moriarty said. “But right now things are operating lean and mean. It’s hard to say if things will stay lean and mean, or if we will get more efficient and have more money for investment.”
Despite the challenges being faced by the oil industry, Moriarty pointed to the community involvement of oil and gas companies during the pandemic, through both financial donations and donations of personal protective equipment.
Greg Meyer, executive director of the Kenai Peninsula Food Bank, gave a shout-out to the industry for providing the food bank with assistance, including purchasing a new truck at a time when the food bank is serving more clients than ever.
Moriarty also pointed to the ongoing potential for exploration and development in places like the North Slope and the Arctic National Wildlife Refuge, which was recently opened to drilling by the Trump administration, as signs of hope for the industry.
The recent lease sale for ANWR was relatively uneventful, with the State of Alaska making the largest bids for the land. Moriarty said this was a direct result of the last year, and companies who would have been interested in the lease sale didn’t have enough cash on hand.
Likewise, Moriarty said not to expect much in the way of new construction on the North Slope this year. Although there are projects underway, most of them are still in the early planning stages. Barring any further shake-ups in the global oil market, ConocoPhillips announced last November that it would resume drilling in the North Slope by December of 2021.
Moriarty took a moment during her presentation to thank the Kenai Peninsula for voting against Ballot Measure 1 during the 2020 general election. Ballot Measure 1 would have implemented a new tax structure on the oil and gas industry. The measure failed to pass, receiving 199,667 “no” votes and 145,392 “yes” votes statewide. Moriarty was part of the One Alaska campaign, which fought against the ballot measure. She noted that House Districts 29 and 30 on the Kenai Peninsula rejected the measure by a larger margin than most other districts.
District 29, which includes the northern part of the peninsula as well as Seward and Cooper Landing, voted 69% against the ballot measure. District 30, which includes Kenai and Soldotna, rejected the ballot measure with 72% of the vote.
Reach reporter Brian Mazurek at firstname.lastname@example.org.