|
State sets Marathon takeover conditions Consent decree for Hilcorp purchase of Marathon’s Cook Inlet assets sets limits on natural gas prices and conditions for LNG exports Alan Bailey Petroleum News
The State of Alaska and Hilcorp Alaska LLC have agreed on a proposed consent decree, as a prerequisite to Hilcorp completing its purchase of Marathon Oil Co.’s Cook Inlet assets, state Attorney General Michael Geraghty announced on Nov. 7. The consent decree, designed to resolve competitive concerns over the purchase, puts a price cap on gas sold for local use over the next five years and prohibits Hilcorp from selling gas for export as liquefied natural gas unless all local gas supply needs are met.
The state has filed the consent decree in Alaska Superior Court. The court will hold a hearing to determine whether to approve or reject it after a 60-day public comment period.
April announcement Hilcorp announced in April that it had come to an agreement with Marathon for the purchase of the Marathon assets. And, with Hilcorp having just completed the purchase of Chevron’s Cook Inlet properties, Hilcorp was set to become the dominant producer of natural gas from the Cook Inlet basin.
It became known during the summer that the Federal Trade Commission, presumably concerned about a single company dominating a small, isolated gas market, was investigating the proposed takeover. And the state attorney general, with a role in protecting the interests of Alaska’s gas consumers, was also involved in the investigation.
The investigation, with no clear end date, became a subject of major concern to Southcentral power and gas utilities. With utility gas supplies from the Cook Inlet’s aging gas fields becoming tight, and with contracted utility gas starting to fall short of projected utility gas demand, utilities have been striving to sign new gas supply contracts with gas producers. But the takeover investigation put contract negotiations into something of a state of limbo, with Marathon unable to commit supplies from fields it was in the process of selling and Hilcorp reluctant to negotiate new supply contract while uncertainty continued over its Marathon purchase.
Drilling delays? The takeover impasse also raised concerns over potential delays in urgently needed drilling in Marathon’s gas fields. Hilcorp, a recent newcomer to the Alaska oil and gas industry, has been moving forward on an aggressive program of field development.
“Hilcorp is well known in the oil and gas industry as an active developer in mature oil and gas basins such as Cook Inlet,” Geraghty said when announcing the filing of the decree. “It plans to spend approximately $300 million over the next two years on new Cook Inlet development in addition to the more than $200 million Hilcorp spent in 2012 alone. This settlement allows Hilcorp to keep investing in Cook Inlet while still protecting consumers.”
And in a Nov. 7 press release Hilcorp expressed its concurrence with the terms of the decree.
“Hilcorp appreciates the efforts of the Attorney General’s office and other state agencies, including the Department of Natural Resources, that worked hard to facilitate this agreement,” the company wrote. “We look forward to working closely with them as we move towards completion of this transaction. Hilcorp also remains committed to completing this acquisition as quickly as possible as it opens the door for further development and investment into the Cook Inlet basin.”
| 