Big Oil reps say they'll trim budgets for 2009 season

The company will trim its worldwide capital budget about 18 percent, to $12.5 billion, as a response to low oil prices and falling energy demand.

Company spokeswoman Natalie Loman said the exact amount of the reduction in Alaska and the projects that will be affected won't be known for some time. It's also unclear whether there will be a cut in the Alaska workforce.

In a Jan. 16 press release, ConocoPhillips said it would cut the number of its employees by 4 percent company-wide.

The company also spends more than $1 billion for operations and maintenance. That is separate from the capital budget, which is spent on drilling and construction of new projects.

Reduced activity will dent the industry's workforce in Alaska, but the effects may be muted because number of people working in petroleum has also soared in recent years to the point that contractors have had difficulty recruiting skilled labor and finding enough housing on the North Slope.

ConocoPhillips is the operator for the Kuparuk River and Alpine fields on the North Slope and is also a major owner of Prudhoe Bay and other producing fields.

"Spending in Alaska is expected to be primarily directed toward the continued development of fields within the existing Prudhoe Bay and Kuparuk areas, as well as development of the Alpine satellites on the western North Slope," the company said in its Jan. 16 press release.

The other major North Slope operator, BP Exploration (Alaska) Inc., will also reduce its drilling activity on the Slope in 2009, but the company's overall spending will actually increase over 2008 levels because of new projects that are underway, particularly the development of Liberty, a small field five miles offshore, in shallow waters in the Beaufort Sea.

BP's plans are to spend $1.2 billion on its 2009 capital budget, up from about $900 million in 2009, the company said. BP also typical spends another $1 billion a year on operations and maintenance separate from the capital budget.

In November, BP said it would reduce its drilling of new development wells by 10 percent in 2009, which translates into the drilling of about nine fewer new producing wells than in 2008.

The company also said it was shelving a $120 million gas processing plant planned for the western side of the Prudhoe Bay field, a decision that was also influenced by increases taxes to the state.

ExxonMobil Corp., a third major producing company, does not release its annual capital or operating costs on a regional basis. However, if ConocoPhillips and BP cut spending for projects in fields where ExxonMobil is also an owner, ExxonMobil's spending for its share of costs likely will be lower as well.

The reductions will dampen the industry's Alaska workforce. However, oil and gas employment has soared over the last few years as oil prices rose and the pace of new development on the Slope picked up.

In December, preliminary figures from the Alaska Department of Labor and Workforce Development indicate that the petroleum industry's workforce totaled 13,100, up 100 when compared to November.

The number is up sharply from a year ago. In December 2007, there were 11,800 working in the industry and 10,700 December 2006.

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