Large oil and gas producer Apache, a major force in the shale boom, is pulling out of Alaska because of low oil prices.
“This announcement reflects the current state of the oil and gas industry across the world and the United States, not just Alaska,” Sen. Lisa Murkowski, R-Alaska, chairwoman of the Senate Energy and Natural Resources Committee, said Friday. She was optimistic the company would return.
“We appreciate Apache’s investment in our state and look forward to working with the company again in the future, to explore and produce Alaska’s prolific oil and gas resources,” she said.
A global oil supply glut has forced many oil and gas companies to scale back operations, as low oil prices make it less economical for them to operate. The global price downturn has forced many drillers in the U.S. shale formations to close rigs and layoff thousands of employees.
The company announced late Thursday that it would be closing its operations in the state, assuring that its pulling out of Alaska would have a “minimal” economic effect.
“We had been scaling back operations with dropping commodity prices over the last year,” a company statement says.
Apache says its downsizing in Alaska is part of the its strategy of reducing operations globally. Apache operates oil and gas facilities from Egypt to North America.
“Due to the current downturn, Apache has had to significantly scale back operations and spending,” the company said. “We recently reduced our spending plans for 2016 by 60 percent from 2015 levels and are focusing our limited dollars on specific international opportunities and strategic testing in North America. Operations we are suspending as a result of the downturn include our Alaskan activities.”
Murkowski used the Apache pullout to underscore the need for a more effective energy policy. “Especially with prices low, it is time for the federal government to increase access to resources in our federal areas, streamline the burdensome permitting process, and provide clear, predictable rules,” she said.
There may be a silver lining for Alaska, however. At the same time Apache is pulling out, major oil company ConocoPhillips became the first company to begin drilling operations in the state’s National Petroleum Reserve. The reserve, as large as Indiana, was set up in the 1920s as a fuel reserve for the U.S. Navy.
The $1 billion investment was secured once Conoco struck a compromise with native tribes on where it could drill. The Associated Press reported Thursday that the Conoco venture could lead to more drilling in related areas.
But why now? The oil majors have more investment dollars than their smaller independent counterparts, such as Apache. ConocoPhillips projects manager Jim Bordie told AP that the project was in the making years before the glut started.
“We’ve spent more than a dozen years trying to achieve the permits to do the development, to complete the development,” Brodie said. “It’s a sizable investment.”
Murkowski, chairman of the Senate Energy and Natural Resources Committee, also noted that the federal government should do more to ensure that American oil and gas companies remain productive.
“Especially with prices low, it is time for the federal government to increase access to resources in our federal areas, streamline the burdensome permitting process, and provide clear, predictable rules,” Murkowski said.
