Alaska economy gets investment-injection

Arco Alaska, Inc. and its partners will spend more than $ 850 million in Alaska -- most of it in 1998 and 1999 -- for engineering services, module fabrication and installation, field construction, drilling and materials procurement, according to Arco Alaska President Ken Thompson.
Thompson briefed state and local officials on the company's near term project plans during a series of meetings. He also announced contract awards to Alaska-based companies for development of the West Sak, Tarn and Alpine oil fields and for major portions of enhanced oil recovery projects at Prudhoe Bay and Point McIntyre. The terms of the agreements are confidential. The projects represent a total investment of $ 1.2 billion. An estimated $ 300 million will be spent to acquire equipment and materials directly from manufacturers and specialised services not available in Alaska.
These projects, in total, will develop more than half a billion barrels of new oil reserves, over 100,000 barrels of gross new daily oil production at peak rates, and create an estimated $ 2.5 billion in new state revenue over the next few decades.
In Nikiski, Alaska Governor Tony Knowles and legislative leaders participated in the dedication of a major new module fabrication facility developed by Natchiq, Inc., a subsidiary of Arctic Slope Regional Corporation. Arco and its partners will use the Nikiski facility to fabricate the largest oil field production modules ever assembled in Alaska. The modules are so large (1,500 tons) they must be moved by barge to the North Slope. Arco Alaska pioneered in-state fabrication of smaller, truckable modules in 1988.
"These projects and these major investments in Alaska are critical to our plans for achieving Arco's North Slope production goal of "No Decline After 99," Thompson said. "Because we have used an `Alaska First' strategy for completion of these projects, they will also create hundreds of new Alaska jobs and new opportunities for businesses across the state."
Over the next two years, monthly Alaska employment on all Arco-managed projects will range from 400 to 1,100 union and non-union workers. Alaska employment will peak in February 1999. Development drilling will extend over the next five years.
Wages, benefits, transportation, food and lodging provided Alaska-based workers are expected to account for $ 350 million of the $ 850 million spent in Alaska.
A year ago, when Arco announced discovery of the 365-million barrel Alpine oil field, the company said Alaska contractors would be awarded the work if they could meet project schedules and deliver quality results at competitive cost.
Construction of the $ 750 million Alpine project will begin in early 1998, pending issuance of necessary permits.
Arco Alaska and its Alpine partners -- Anadarko Petroleum Corp. and Union Texas Alaska, LLC -- will be first to construct large, sealift modules in Alaska. To accomplish this in-state, Alaska Petroleum Contractors opened the Nikiski fabrication yard.
The Nikiski facilitywill be a major boost to the Kenai Peninsula economy, where the Alpine project will create 18 months of employment and up to 250 new jobs.
The facility also represents a major expansion of the state's fabrication capability and will allow the Alpine project team to complete 7 large, sealift modules in Nikiski and 55 of 60 Alpine production modules in Alaska. Five sealift-size modules will be constructed out-of-state at a yet-to-be- determined location in the United States.
"The Nikiski yard will be full," Thompson said. "After conferring with our Alpine contractors and considering all of the alternatives we jointly determined that the remaining sealift modules could not be done on schedule at competitive cost in state. However, this outside work, totalling $ 20 million will be overseen by our Alaska contractors."
All Alpine truckable modules will be assembled in Alaska, with most of the work being done at the APC fabrication facility in Anchorage.
The work -- which will include prefabrication work to support the Nikiski site -- will begin in January 1998 and stretch until June 1999, creating stable employment for an estimated 100 to 125 workers. Installation of Alpine facilities will begin in December 1998 and create more than 12 months of stable North Slope employment for 100 workers, peaking at more than 350 in 2000.
Houston Contracting Company will handle pipeline construction, installing four horizontal, directionally drilled, cased crossings 100 feet below the Colville River in early 1998 and constructing three 35-mile, above-ground pipelines in late 1998 and early 1999. Pipeline construction will create up to 300 jobs for union Pipe fitters, Operating Engineers, Labourers and Teamsters dispatched out of Fairbanks.
Doyon Drilling, Inc. of Fairbanks will do Alpine development drilling. The field development plan calls for the completion of 100 wells. Drilling will begin in early 1999 and is expected to take up to five years, creating employment for an estimated 100 workers.
NuiqsutConstructors, a joint venture of Kuukpik Corporation and SKW Eskimos, will do Alpine civil work, constructing necessary roads and gravel pads. Work will be limited to winter months so that gravel can be delivered to the Alpine location via ice road. The gravel haul will create an estimated 80 jobs in 1998 and an estimated 25 jobs in 1999.
Alpine engineering design work is being performed by three firms. APEL Engineering, an Anchorage subsidiary of Arctic Slope Regional Corporation, and TriOceans Engineering of Calgary are handling facility design. The Anchorage office of Michael Baker Company is responsible for pipeline design.
Alpine start-up is scheduled for early 2000 with peak production of 70,000 barrels a day expected in 2001.

Prudhoe Bay, Point McIntyre EOR
VECO Construction has been selected as the North Slope construction and Installation contractor for the $ 160 million Prudhoe Bay Miscible Injectant Expansion (MIX) Project.
The MIX project -- funded by Arco Alaska, BP Exploration, Exxon and other Prudhoe owners -- will increase Prudhoe Bay production by 20,000 barrels per day. Start-up is scheduled for the fall of 1999.
As North Slope construction and installation contractor for the project, VECO will make significant modifications to the Prudhoe Bay Central Gas Facility (CGF) and install a 2,300 ton compressor module that will be delivered by barge to the North Slope in August 1999. Work will begin in early 1998 and stretch over 24 months, with North Slope employment ranging from 10 to 180 workers.
Arco Alaska, BP Exploration and Exxon are also initiating a $ 45 million enhanced oil recovery (EOR) project at Point McIntyre. VECO Engineering has been awarded the engineering design work. The design effort is expected to create 50 jobs in Anchorage.
Both the MIX and Point McIntyre EOR projects will require module fabrication. Engineering design work is still being done on these projects. Arco will solicit proposals for fabrication of these facilities in Oct. withcontract awards expected in early 1998. Alaska companies will have the opportunity to compete for this work.

West Sak (Phase 1) & Tarn Development
Phase 1 West Sak development within the large, Arco-operated Kuparuk field will begin later this month. The estimated cost is $ 98 million. Fifty wells are planned. The investment will yield 50 million barrels of oil. First production is expected by year end, with peak production of 7,000 barrels a day in mid 1999. Arco Alaska, Inc. and BP Exploration are the major owners of West Sak.
Construction of the $ 140 million Tarn oil field -- announced in early 1997 by Arco Alaska and BP Exploration adjacent to the Kuparuk field -- will begin in early 1998, pending final co-owner approval and issuance of necessary permits. The field contains an estimated 50 million barrels of proven and potential reserves. First production is expected in November 1998 with incremental production of 15,000 barrels of oil per day in 1999.
The field will consist of two drill sites, approximately 40 wells, two pipelines, a road and power lines. Drilling will be spread over two years.
Oil from both West Sak and Tarn will be processed through existing production facilities in the Kuparuk Field.
Engineering design for both the West Sak and Tarn projects is being provided by the Anchorage office of Alaska Anvil. Fabrication of necessary structural, electrical and instrumentation infrastructure will be completed by Alaska Petroleum Contractors. VECO Construction will install power lines at both fields. Tarn civil work will be performed by Alaska Interstate Construction, a union subsidiary of Cook Inlet Region, Inc.
Parker Drilling will handle development drilling at West Sak by moving Rig 245 from Kuparuk. Doyon Drilling, Inc. will do development drilling at Tarn.