BP bids around the edges

Cash-strapped, can’t compete for costly leases in center; gambles on Prudhoe structure’s similarity to prolific Iranian discovery

Kay Cashman

Petroleum News

In 1964 the first state land at Prudhoe Bay was put up for auction. Disheartened by the failures in the Brooks Range and Colville River delta, Sinclair opted out of the sale, which proved to be a poor decision.

“They got faint of heart,” said Richfield Oil and later Humble Oil North Slope geologist Gil Mull. “Sinclair bailed at exactly the wrong time; basically, as a result of that decision, Sinclair ceased to exist.”

ARCO ended up swallowing Sinclair, a company that could have been a very large part of things at Prudhoe Bay, he said.

Short of dollars, British Petroleum, or BP, decided it could not compete with American companies for expensive leases in the center of the structure.

Instead, BP gambled on the striking similarity of the Prudhoe Bay structure to its discovery in Iran - where the oil-bearing rocks had proved to be thicker and more prolific around the flanks of the field.

In some instances, BP did bid on what were considered prime tracts at the crest of the Prudhoe structure, but was outbid by Richfield.

When the bidding closed, BP had acquired 90,000 acres around the rim at an average price of just over $16 an acre compared with the $93 an acre Richfield paid for leases in the central area.

The summer of 1966 saw little drilling activity by BP. Some were surprised when the company bid on Sag Delta tracts in a 1967 state lease sale. BP acquired six offshore tracts northeast of Prudhoe Bay, in the vicinity of today’s Niakuk and Endicott fields.

But cash-strapped and discouraged by nine successive dry holes further west, the company decided to sit tight and watch what its new neighbors, operator ARCO and partner, Exxon subsidiary Humble, were doing.

ARCO’s 1968 strike at Prudhoe Bay State No. 1 - at the center of the structure- was the largest ever found in North America.

Three months later ARCO drilled a second well - Sag River State 1 - seven miles southeast of Prudhoe Bay State 1, which confirmed that discovery.