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Vol. 15, No. 29 Week of July 18, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Oil Patch Insider: Against drumbeat of Apache rumors, Mingé urges ‘Team Alaska’ to focus; orphan wells; Laird retires; eBay query

Is Apache Corp., a large Houston-based independent, really looking to buy BP assets including a piece of Alaska’s giant Prudhoe Bay oil field?

Who knows. Spokesmen for the companies weren’t confirming anything.

“We do not comment on market speculation,” Steve Rinehart, spokesman for BP Exploration (Alaska) Inc., told Petroleum News on July 14.

Rinehart added: “You may recall we said in mid-June that we planned to pursue certain divestments up to $10 billion, and expected this to be mainly non-core upstream assets that do not fit our long term growth strategy.”

Whether those non-core assets might include Alaska properties was unclear.

The Apache talk took off after a July 11 story in London’s Sunday Times saying BP was in talks about possibly selling a stake in Prudhoe to Apache. The New York Times had a similar report the same day, writing that BP was looking to sell Apache assets including “stakes in its Alaska oil fields” for $10 billion to $12 billion, according to “a person briefed on the matter.”

Citing unnamed sources, Bloomberg reported July 15 that BP was pressing to work a deal before July 27, ahead of its second quarter earnings report, to sell half its Prudhoe stake to Apache. Discussions over the rights of BP’s partners in Prudhoe had slowed the timing, Bloomberg wrote.

Apache made quick progress toward raising between $6 billion and $7 billion in financing, the Bloomberg story continued, as lenders “saw potential for Apache to squeeze more production from Prudhoe Bay, which has been a declining field.” The story said Goldman Sachs Group Inc. and Bank of America Merrill Lynch were advising Apache with Standard Chartered PLC advising BP.

Whether any Apache deal comes about, of course, remains to be seen.

Some intriguing activity involving Apache has transpired locally in recent months.

On May 18, a firm called Apache Alaska Corp. was registered with the Alaska Department of Commerce. The registration says the company will be involved in “support activities for oil and gas operations.”

Apache spokesman Bill Mintz in Houston told Petroleum News on July 15 that Apache had acquired some onshore Cook Inlet leases “in the last few weeks.” He said he didn’t know from whom the company had obtained the leases.

He declined to comment on the BP chatter.

Apache has exploration and production interests in the Gulf of Mexico, Canada, Egypt, the North Sea, Australia and Argentina. The company had revenue of $8.6 billion in 2009.

Recently the firm has expanded aggressively. On June 10 it announced completion of a $1.05 billion deal to acquire Devon Energy Corp.’s oil and gas assets in the shallow waters of the Gulf of Mexico shelf. Apache also is working to close a merger with Mariner Energy, which will extend Apache into the deepwater Gulf.

BP for many years has battled recurrent speculation that it was contemplating an exit from Alaska. The hugely expensive catastrophe with its Macondo well in the Gulf has reignited such talk, including the Apache reports.

Petroleum News acquired a July 12 internal employee memo from John Mingé, president of BP Alaska, urging “Team Alaska” to stay focused:

“There has been a stream of recent news stories speculating that Alaska assets are being considered for sale. This is not the first speculation we’ve seen in the last couple months and it probably will not be the last. It’s a natural market reaction to Tony Hayward’s recent announcement that BP will be raising cash through asset sales as part of our response to the Horizon incident. I recognize this is a distraction, and my biggest concern is that this somehow gets in the way of our delivery of great performance through safe and reliable operations.

“I know that these last few months have been difficult, regardless of where you work or your job. We are all emotionally connected to the incident and the outcomes in one way or another. We are operating in an extraordinary time — as we are under intense scrutiny and many of our people are away supporting the GoM. But through this adversity, when I see what you are delivering, I can only say thank you.”

The memo continued: “The best thing we can do with speculation is to put it to the side — let’s focus on the things we can control — like safely operating 70% of Alaska’s oil production.”

—Wesley Loy

Does Alaska have a handle on its orphaned and abandoned wells?

Here’s the first paragraph of an Associated Press “investigation” released July 6 and widely published: “More than 27,000 abandoned oil and gas wells lurk in the hard rock beneath the Gulf of Mexico, an environmental minefield that has been ignored for decades. No one — not industry, not government — is checking to see if they are leaking.”

The impetus for the story was the disastrous Gulf oil spill, which of course involved a newly drilled exploratory well and not an abandoned well. The AP quoted experts on the dangers abandoned wells can present.

The story didn’t mention Alaska, so Petroleum News decided to check with the Alaska Oil and Gas Conservation Commission, which regulates drilling, on the situation with abandoned wells locally.

The positive news is that regulators believe they know of every oil and gas well ever drilled in the state. That is, they know where the hole is, and whether it is active, shut-in, suspended or abandoned.

Only a handful are true orphans — wells that no longer have an owner, says Cathy Foerster, an AOGCC commissioner and a petroleum engineer.

A big goal for the AOGCC is to stay on top of all wells to make sure no more become orphans, she says.

In Foerster’s view, Alaska wells that have been properly plugged and abandoned according to AOGCC regulations simply aren’t a worry. Saying nobody is watching them, she says, is “like saying the police aren’t making sure the dead people aren’t breaking the rules.”

The wells that really do concern the agency are those that have been shut-in or suspended for a long stretch of time, perhaps years.

In early 2009, Foerster and the AOGCC moved to update the status of inactive wells. The agency began sending letters to the operators of dozens of these wells, advising them that the commission had just revised its regulations on suspended wells.

The letters asked companies to verify lists of suspended wells and long-term shut-ins, and to “please identify the plans, including the schedule, to plug and abandon the well, suspend the well, return the well to production, or convert the well to a water well or injection well.”

Foerster said she can’t say those letters were the reason, but operators such as BP, ConocoPhillips and ExxonMobil have since plugged and abandoned some wells.

Alaska does have some abandoned wells out there in need of potentially costly attention. These include the orphaned Rosetta wells, drilled in the 1950s in the vicinity of Alaska’s Houston community, and a string of old “legacy wells” drilled under the direction of the U.S. government in the National Petroleum Reserve-Alaska.

—Wesley Loy

Alliance funny guy Laird decides to hang up his Aloha shirt

Paul Laird insists his offbeat business attire and equally unruly sense of humor didn’t get him fired.

Matter of fact, he says, a bunch of his board members at the Alaska Support Industry Alliance now wear Hawaiian shirts, just like he so often does.

“I have that effect on people,” says Laird, busting out with his trademark wry laugh.

Laird, who turns 58 in October, says he’ll retire around that time as general manager of the Alliance, a nonprofit trade association made up of hundreds of product and service providers to the oil and gas and mining industries. He’s held the job since July 5, 2005.

Five years is a good amount of time to run a nonprofit, Laird says. Much longer than that, he says, and a person and an organization can go stale.

Previously a public affairs man for many years with BP, Laird says he’ll be involved with two big upcoming Alliance events — the annual meeting in early October, and the Meet Alaska conference in January. After that, he might do some contract work.

As for another fulltime job, nah, Laird doubts it. Unless maybe the perfect position comes along.

“I was kind of hoping Midnight Sun Brewing might need a quality control person,” he says.

—Wesley Loy

Shopping for a unique gift? How about 30 square feet of Alaska oil and gas mineral rights for $10?

In early July a woman shopping on eBay questioned the legitimacy of an offer from akresort that appeared to be the State of Alaska selling tiny pieces of undeveloped oil and gas mineral rights for $10 each. She asked the Better Business Bureau in Anchorage for help.

BBB contacted the State of Alaska’s Division of Oil and Gas, in charge of state oil and gas leasing, which, in turn, contacted eBay.

In an email eBay’s Chet Ricketts from the “Office of the President” promised to “follow-up to assure” the ads were “reviewed and within policy.”

The division also tried to contact the seller, akresort, but unlike many other happy shoppers (per comments and ratings of purchases from akresort by eBay customers) didn’t get a response.

The eBay item, number 180387989296, which appeared twice on the site, has since been removed. Here’s what it said:

Headline: “Own Alaska Oil and Gas Mineral Rights 30 SQ FT FOR $10 Invest in Alaska Oil and Gas”

Text: “The Legal Owner of Alaska Land and its mineral rights is dividing up property mineral rights into small leases of 30 square foot each. …”

There’s more but we’re out of space. Busy news week. E-mail [email protected] if you’d like a copy of the entire eBay advertisement.

—Kay Cashman

ExxonMobil issues ‘safety alert’ for its Anchorage workforce

As development of its Point Thomson gas field advances, ExxonMobil’s Anchorage workforce has grown considerably. And the company seems intent on making its people feel welcome and secure.

Consider the “Point Thomson Project Safety Alert” Exxon issued July 3. The one-page memo describes a July 1 incident in which “a female driver” in Anchorage — it doesn’t say whether she works for Exxon — was followed home by a man driving a silver minivan with a “Thermax Carpet” logo on the side.

She first saw the van on Northern Lights Boulevard and felt the driver “spent an inordinate amount of time looking at her,” the memo says.

“The woman thought that she had lost the suspicious minivan while driving in traffic but advised that shortly after arriving at her residence, the man driving the minivan knocked on her door,” the memo says.

She let a “male friend” answer the door. That seemed to startle the minivan guy, who said: “I’m in training and want to offer a free demonstration,” the Exxon alert says.

The friend said no thanks, and the man left.

A local Thermax Carpet representative advised no one working for the cleaning company matched the man’s description, but said some magnetic company signs had been stolen, the memo says.

The Anchorage Police Department issued a July 6 press release with a similar description of the incident. The release said another woman also complained about the suspicious man.

—Wesley Loy

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