Some hanging on for long haul

Alaska businesses remaining in Russia biding their time

Posted: Saturday, April 22, 2000

Doing business in the Russian Far East has been a roller-coaster ride for Alaska investors.

Oil field service companies on the Kenai Peninsula, such as Peak Oilfield Services, Air Liquide, Natchiq and VECO have been working on Sakhalin.

The University of Alaska's Mining and Petroleum Training Service (MAPTS), based in Soldotna and Peak help operate the Sakhalin Alaska College for training oil field workers. The Russians now working on offshore drilling studied at the facility and spent time training in Kenai and Soldotna.

Air Liquide, in North Kenai, has been servicing Russia for years.

Branch Manager Jim Evans estimated that he has made about a dozen trips there over the past five years. He plans to return to Russia in March. His firm sells welding gases and maintenance equipment to other oil field service companies.

Evans works with mining interests near Magadan but is finding more and more business on Sakhalin, he said.

Natchiq, a division of the Arctic Slope Regional Corp., formed a Russian subsidiary, Natchiq Sakhalin Inc., in late 1998. In September 1999, it opened an office in Yuzhno-Sakhalinsk, the region's largest town, and in November it won the contract to maintain the Molikpaq oil drilling platform, the first (and so far only) one in production, said Keith Burke, general director of Natchiq Sakhalin.

Natchiq will be watching the 2000 drilling season closely and expects good news, he said.

If Sakhalin pans out, the company will use its Nikiski construction facility to build items for the Russian field.

"(Oil companies) believe they have located a fairly significant reserve of oil. That is what we are positioning ourselves for. We are very committed," Burke said.

Bill Stamps, head of Peak in Nikiski, has been involved with Russia for years. He is a member of the state Alaska Sakhalin Working Group and is the American co-chair of the energy sector committee of the federal U.S. West Coast-Russian Far East Ad Hoc Working Group, part of the Business Development Committee of the U.S.-Russian Joint Commission on Economic and Technological Cooperation.

Peak is not working in Russia right now but is seeking opportunities, he said.

"A lot of people have spent an awful lot of money over there. They don't always succeed. We are taking a cautious approach," Stamps said.

The Alaskans who have stayed in the Russian Far East have weathered some tough times, especially during the 1998 downturn of the ruble and the resulting economic shambles.

"A lot of things came to a halt," Evans said.

Many firms, especially businesses in other sectors, pulled out.

Companies such as Tesoro, Alaska Airlines and Country Foods are no longer doing business in the region.

The major airlines providing direct flights between Anchorage and Russia discontinued service. The only American carrier now offering regularly scheduled flights is Reeve Aleutian.

From 1997 to 1999, the number of foreign companies operating in Sakhalin declined 30 percent, according to Chuck Becker, director of the Alaska Export Assistance Center and adviser to the Alaska Sakhalin Working Group.

The residents themselves have fared poorly as well. The island's population declined by 100,000 people during the Yeltsin administration. Sakhalin remains a bleak, isolated and impoverished outpost for many, American visitors reported.

But recent news from the region hints that better times may lie ahead.

An analysis by the U.S. Consulate in Vladivostok, published in the January newsletter of the American Russian Center at the University of Alaska Anchorage, showed that the U.S. companies are more likely to survive than other foreign interests and increasingly are dominating the region's overseas trade.

"First, American exporters show more long-term persistence in this market," wrote Richard Steffens, the consulate's principal commercial officer. "Second, the most significant import of the Russian Far East is now becoming equipment, where U.S. firms often have technological advantages."

Dennis Steffy, director of the MAPTS, said his years of work in Russia can be characterized as "hurry up and wait."

Insiders have told him to expect big action in about a year and a half.

"After seven years, maybe something will go," he said. "But they told me that in '95, too.

"It was all supposed to have happened five years ago. So I take it one day at a time."



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