Economists say the loss of hundreds of oil jobs tied to the sale of BP’s Alaska business will be significant, but not devastating, for the state’s fragile economy.
“There is enough happening from a lot of different sectors to where this is not disastrous by any stretch,” said Mouhcine Guettabi, an economist with the Institute of Social and Economic Research at the University of Alaska Anchorage.
BP, which has been a major employer in Alaska for decades, is planning to sell all of its assets in the state to Hilcorp, a smaller, private company, in one of the state’s biggest oil industry deals.
Regulators still need to approve the $5.6 billion deal. Last week, Gov. Mike Dunleavy announced the creation of an oversight committee to monitor the transaction.
In the meantime, a sketch of Hilcorp’s future workforce is beginning to take shape, and it appears there will be fewer employees in Anchorage and Prudhoe Bay in 2020.
BP Alaska officials said earlier this month that about 750 of the company’s nearly 1,600 employees had accepted job offers from Hilcorp.
That leaves hundreds more who won’t be transitioning from one company to the other.
Some have resigned for other jobs. Some will transfer out of Alaska to stay with BP after the sale goes through. Some will retire early. Some will be laid off.
In notices sent to the state Department of Labor and Workforce Development on Dec. 19, BP said it expected 632 of its Alaska employees to lose their jobs next year — 345 who work in Prudhoe Bay and 287 who work in Anchorage.
About three-quarters of those workers are Alaska residents, according to a BP Alaska spokeswoman.
The employees will lose their BP jobs in three waves: The first group in February, the second group when the sale closes and the third group within six months after that, the notices say.
BP and Hilcorp say they’d like the sale to go through by the middle of 2020. But it could take longer, state officials have said.
The deal includes BP’s stakes in the giant Prudhoe Bay oil field and the trans-Alaska pipeline, plus the rest of its Alaska assets.
Guettabi said the employment losses expected to stem from the sale could erase the modest job growth Alaska’s oil and gas sector has seen over the past year.
Last month there were an estimated 9,700 oil and gas jobs in Alaska, up from 9,300 in November 2018, according to state employment data. That’s down about 4,500 jobs compared to 2015.
“It’s been a really long recession,” Guettabi said. “This year, it seems like the state has turned the corner, but the growth has been modest and it’s been largely driven by oil and gas and construction, so this certainly slows things down a little bit.”
Next year’s expected oil job losses will likely impact Anchorage the most, said Neal Fried, an economist with the state labor department.
He said it’s also important to remember that the oil jobs are among the highest-paid positions in Alaska. That means the impacts of their elimination will likely be far-reaching.
“It doesn’t stop at laying off one BP engineer,” Guettabi said.
That engineer “spends money at retailers and restaurants and pays bills and has a mortgage and if that person leaves the state, all that spending halts. There’s another house on the market,” he said
Nobody knows for sure exactly how many laid off BP employees will end up leaving the state.
Earlier this month, BP and the state said they would work with the employees to help find them new jobs.
Bill Popp, president and chief executive of the Anchorage Economic Development Corporation, said he’s hopeful most will decide to stay in Alaska. He said he’s heard from some BP workers who have already found new jobs with other oil companies in the state.
Popp described this period in Alaska’s employment landscape as a transition.
“It’s not the end of the world as we know it,” he said.
Popp said he’s also waiting to see if Hilcorp decides to hire more employees after the sale goes through.
In a statement earlier this month, Hilcorp Alaska said it expected to post more than 150 additional jobs in the coming months, growing its workforce to around 1,500 employees. (That includes the BP workers making the transition.)
That still means it would operate with hundreds of fewer workers. Popp said he expects Hilcorp to hire more contractors.
“It’s going to be a new dynamic for us,” he said.