Oil & Gas
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Workers build and install entrance stairs and a landing for a camp on the North Slope.

GBR Oilfield Services

Local Fabricators Still Fill Niche
Alaska‘s manufacturers provide specialized and short-term fabrication solutions
By Isaac Stone Simonelli

laska companies vying for oil and gas company contracts to fabricate custom objects and supply materials to the state’s most dominant industry faced increased competition from the Lower 48 after the oil market took a dive several years ago. “The oil market dictates a lot of what happens on the North Slope. Over the last several years, we saw a lot of projects get put on hold or canceled altogether,” says Jim Wohlers, general manager for GBR Oilfield Services.

“With the drop in demand came the willingness of some of the larger, out-of-state companies to take on work at much lower rates. Over the past six months, we have seen a gradual increase in projects and work on the North Slope. In addition, over the past several years, we have seen a steady increase in the importance of safety across the field,” he says.

According to Richard Faulkner, owner of Steelfab, a custom fabrication company in Alaska, competition with companies in the Lower 48 is nearly impossible due to a number of factors, including higher wages demanded by skilled workers and significant employee compensation costs.

“The majority of the bigger jobs don’t come from Alaska anyways. Alaska doesn’t buy anything from Alaska—little. They buy things from somewhere else and ship it up here,” Faulkner says. “You can’t compete with them.”

“The remote location of the Slope makes everything urgent. We are often called to designand fabricate a piece or part because it will take too long and cost too much to have it shipped from the Lower 48.”

—Jim Wohlers, General Manager, GBR Oilfield Services

With workers’ compensation insurance in Alaska costing up to 25 percent—the second highest in the United States—Faulkner explains that he ends up paying about an additional $7.50 an hour for employees who make about $30 an hour.

“I’ve got to compete with folks, let’s say in Washington, and they’ve got to pay maybe $20 to $25 for the same quality of person, and their workers’ comp rate is like $1.50. And if you go to Montana, they pay $15 to $16 an hour—they might pay a little more—but they only pay 50 cents an hour for workers’ comp,” Faulkner says.

“Alaska cannot compete with someone out of state unless something is overheight, overlength, overwidth, or overweight. At that point, the freight companies bring us up to where we are semi-competitive with where these other guys are.”

The real advantage Alaska fabrication businesses have is that when a company in the oil and gas industry needs something—and they need it now—a local company is able to satisfy that need, Faulkner says.

“They can come down and look at it. If you’re doing them a $50,000 to $100,000 job and they can get an inspector in here and appraise quality and progress, [that’s an advantage],” Faulkner says.

GBR’s primary lines of service are casing running, welding and fabrication, and nondestructive testing, and Wohlers agrees that the quick turnaround that Alaska companies can provide makes a huge difference in the market.

“The remote location of the Slope makes everything urgent. We are often called to design and fabricate a piece or part because it will take too long and cost too much to have it shipped from the Lower 48 in the timeframe the customer has established,” Wohlers says.

The other primary advantage of being an Alaskan-owned and -operated business is knowing the market and establishing long-term contacts, as a lot of work comes by word-of-mouth and previous contacts, says Wohlers.

Established in 1973, GBR is one of the oldest companies servicing the North Slope without any change of ownership and provides at least one of its lines of service for all of Alaska’s oil and gas companies and a majority of the service companies. However, despite the company’s deep roots in the industry, competition from Outside is still stiff.

“We do find it difficult to compete with companies coming out of the Lower 48 as they are often able to fabricate out-of-state at a cheaper rate and are also willing to do work on the North Slope at a rate below what we are able to make a profit at simply based upon economies of scale. Likewise, we see some potential customers use companies based out-of-state simply because they dealt with them previously on another project in a different state and never really give a local company a fair chance to win the work,” Wohlers says.

Workers build and install entrance stairs and a landing for a camp on the North Slope.

GBR Oilfield Services

Workers build and install entrance stairs and a landing for a camp on the North Slope.

GBR Oilfield Services

Steelfab is also a legacy fabrication company in Alaska.

Established by the Swalling family in 1948, Steelfab is still family-owned, but now by the Faulkner family, who purchased it in 1988.

“We’ve forged our reputation on exceptional customer service, an extensive product inventory, and the very best steel processing, fabrication, and services,” the company’s website states. Primarily a steel company, Steelfab works mostly with carbon steel and some stainless steel, though it does a modest amount of aluminum work.

The company is located on a 10-acre site with an 84,000-square-foot facility housing six 10-ton and five 5-ton overhead cranes, four 1-ton jib cranes, two computer-guided plasma cutting tables, and a lot more gear.

“Hell, we’ve got every kind of piece of equipment you can think of,” Faulkner says.

The business itself is broken into three different areas: a service center that sells steel products (similar to a hardware store), code fabricator, and coating and painting services.

In December, Steelfab was working on a number of projects for the oil and gas industry, including a derrick extension for Hilcorp and an enormous generator module with the help of Delta Construction for Brooks Range Supply.

One specialty item created by the company for the North Slope is a jack system for piping that compensates for subsidence.

“We do quite a bit of the subsidence things for BP, as well as repetitive repair work on that product for ConocoPhillips,” Faulkner says. For custom jobs, Faulkner admits that he sometimes doesn’t even know what his team is building. The drawings are sent to a team that turns the engineering drawings into shop drawings—shop drawings break down the final product into all the parts the shop needs to build. Once the shop drawings are approved, his team gets to work fabricating.

Additional types of work are contracted out. Once the modules are built, teams will come in to do the wiring, instrumentation, and any other necessary work.

Workers build and install entrance stairs and a landing for a camp on the North Slope.

GBR Oilfield Services

Workers build and install entrance stairs and a landing for a camp on the North Slope.

GBR Oilfield Services

“As a job shop, they send you a set of drawings and you build whatever it is they sent you. So, it varies. You can’t say we just do one thing. We don’t just build tanks. Though we do build tanks as a manufacturer,” Faulkner says, noting that a shop like his is different than a specialty shop, such as Greer Tank and Welding.

Greer Tank and Welding is the largest tank manufacturer in the state, making everything from home septic tanks to fuel tanks for the North Slope. The company, based in Fairbanks, expanded to Anchorage in 1971. Then, in 1993, it set up a workshop in Lakewood, Washington.

Though the company’s growth since its founding in 1952 can be attributed to the high demand for tanks in the oil and gas industry, it’s not the only reason the company continues to perform well.

One of the Greer Tank and Welding’s many projects included a 50,000-gallon tank for Hilcorp. Though metalwork is still the company’s primary focus, it has expanded into plastic manufacturing to meet demand.

The time it takes to build items for companies operating on the North Slope varies drastically—as do the costs—depending on the project.

“Customers dictate the completion dates for jobs, and these can be from twenty-four hours to six months or more. We often will add staff to meet customer demands,” Wohlers says. “We will perform minor repairs that take a couple of hours, basic modifications that only take a couple of days, fabricate and build items that take from a week or two to a tank farm that takes several months to design and fabricate.”

Weather can also dictate a lot about the project, though Wohlers doesn’t see any changes in overall demand from summer to winter, just changes in the types of work demanded. For example, there is more rig maintenance type projects during the summer, as rigs are busy running during exploration.

The price for projects also varies from as little as a minimum charge for an hour of work—$85 at GBR Oilfield Services—to hundreds of thousands of dollars. In fact, it’s not unheard of for fabrication companies doing larger projects for the oil and gas industry to stick multi-million-dollar price tags on contract bids.

One recent shift in the steel industry, perhaps surprisingly, has not had a real impact on fabricators such as Steelfab, and that’s the Trump administration’s tariffs on imported steel and aluminum, says Faulkner.

In February the administration announced tariffs of 25 percent on most imported steel and 10 percent on aluminum imports, aiming to combat low-priced steel from China flooding the global market, though other trading partners were also caught up in the move.

“The domestic users have increased their prices justifiably,” Faulkner says. “[But] it’s more of an availability issue than a price issue… [For] oil-related local fabrication, the size of the project we tend to do is about 60 to 80 percent labor and about 25 to 30 percent of the cost of the project is material.”

So, when the cost of steel goes up, it only impacts 20 to 25 percent of the total costs, working out to a roughly 5 percent overall increase. However, for fabricators in the Lower 48 that have more automated facilities, the numbers for labor and material costs flip—which means changes in material costs have a greater impact overall on their business.

“It really doesn’t affect us. If you consider the number of fabricators who are in Alaska, it’s not that big of a deal right now,” Faulkner says.

Though competition will remain stiff with regard to many types of products destined for the North Slope coming from Outside, there remains an important—and valuable—niche in the economy for locally-owned and -operated custom fabricators and suppliers in the Last Frontier. In this way, legacy companies that have successfully diversified their offerings will continue to provide last-minute help to the oil and gas industry, as well as manage those projects that are too big for the Lower 48.