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Mobil’s 20 percent share of CIPL split Pacific Energy Resources, which is acquiring Forest Oil’s Alaska assets, will end up 50-50 owner of Cook Inlet Pipe Line with Chevron Kristen Nelson Petroleum News
As part of its purchase earlier this year of Forest Oil Corp.’s Alaska assets, Pacific Energy Resources Ltd. will become 50 percent owner of the Cook Inlet Pipe Line Co., the 44-mile onshore line that carries crude oil down the west side of Cook Inlet to the Drift River Terminal.
Forest owned 40 percent of CIPL; 40 percent was owned by Chevron (formerly Unocal); the remaining 20 percent was owned by Mobil Pipe Line Co. (part of ExxonMobil).
The Regulatory Commission of Alaska is considering an application by Forest and Mobil for approval of a sale of half of Mobil’s 20 percent share in CIPL to Forest.
In a separate application, Forest and Pacific Energy have applied to the RCA to transfer Forest’s interest in CIPL to Pacific Energy. Chevron is, and will remain, the CIPL operator.
CIPL transports crude oil from the Granite Point, McArthur River, West McArthur River, Trading Bay and Redoubt Shoal fields to the Drift River Terminal for transportation by tanker. In addition to the pipeline, CIPL’s assets include dual 2.7-mile offshore lines, the Drift River tank farm and the offshore Christy Lee tanker loading platform.
Mobil sale dates to 2002 In the application filed by Forest and Mobil for transfer of a 10 percent interest in CIPL, the companies told RCA that Mobil agreed to sell its entire 20 percent share in CIPL to Forest in January 2002, “subject to non-selling shareholders’ right of first refusal.” Prior to the sale, Forest and Chevron (formerly Unocal) each owned 40 percent of CIPL; Mobil owned the remaining 20 percent.
Prior to 2002, Phillips Petroleum Co. (now ConocoPhillips) owned 20 percent; that share was acquired equally by Forest and Unocal (now Chevron) following an initial offering by Forest. As in this case, Unocal exercised its right of first refusal and the Phillips’ interest was split between the two companies.
Between 2002 and 2007, “Unocal and Mobil were engaged in civil litigation before the Delaware Chancery Court, resolving questions posed by the exercise by Unocal of its preferential purchase right,” the companies said — litigation which was only settled early this year.
The 2002 sale agreement was amended in June of this year to reflect that Forest was purchasing only half of the Mobil interest in CIPL.
The companies told the commission that Chevron will purchase Mobil’s remaining shares in CIPL and those companies will then file an application for approval of that transfer.
ExxonMobil Alaska Production Co. has Cook Inlet crude oil production from the South Granite Point unit (the Granite Point platform) where it has a 75 percent working interest; Chevron, with a 25 percent working interest, is the operator. Unocal took over as CIPL operator from Mobil in 1995.
Forest — whose Alaska assets have been acquired by Pacific Energy — has production from a 100 percent working interest in the Redoubt unit (Osprey platform); from a partial interest in the Trading Bay unit (King Salmon, Grayling, Steelhead and Dolly Varden platforms) operated by Chevron; and from its 100-percent owned West McArthur River unit and Kustatan field.
In the application for approval of the transfer of 10 percent ownership from Mobil to Forest the companies told the RCA this “is not a substantial change in ownership.” Unocal Pipeline Co. will continue to serve as CIPL’s operator and handle day-to-day operations and the pipeline’s bylaws will not be changed: they require a majority vote of 51 percent for any operational changes. Because of the 51 percent voting requirement, the companies told the commission, “no one entity can unilaterally control CIPL,” whether the ownership remains as it is, or whether Forest’s acquisition of a portion of Mobil’s interest is approved. After the Chevron acquisition of the remaining 10 percent of CIPL held by Mobil, each of the remaining partners would hold a 50 percent interest, requiring agreement under the bylaws for an operational change.
The companies said the transfer from Mobil to Forest “will not result in changes to CIPL’s tariff, operating infrastructure, management, personnel or equipment or the services CIPL provides.”
In the application for approval of Pacific Energy’s acquisition of Forest’s interest in CIPL the companies said Pacific Energy is 100 percent owner of San Pedro Bay Pipeline Co., operator of the San Pedro Bay Pipeline, which transports production from platforms and facilities in the Beta unit offshore California. Pacific Energy’s onshore production includes portions of seven California oil and gas fields with 170 wells producing a total some 850 barrels of oil equivalent per day. Pacific Energy also owns and operates a platform in the Beta unit offshore California which produces 2,100 boe per day, and has recently undertaken an oil and gas exploration project in the Green River basin of Wyoming.
The companies said Pacific Energy hopes to increase production from the Forest properties in Alaska “by utilizing current engineering and production technology.”
Pacific Energy reported total revenues of $8.9 million for 2006 and approximately $157 million in total assets.
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