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Vol. 24, No.36 Week of September 15, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

Oil patch insider: Feds might not allow Conoco to operate Prudhoe Bay; Gil Mull and Richfield at Katalla

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Kay Cashman

Petroleum News

As the three main owners of the Prudhoe Bay oil field hash out who will operate the unit when the deal between BP and Hilcorp closes in 2020, their conversations undoubtedly involve concerns about federal and state approval of Hilcorp’s acquisition of BP Exploration (Alaska) and its assets, especially if ConocoPhillips elects to operate all or part of the Prudhoe unit. (See story in the Sept. 8 edition of Petroleum News, titled Prudhoe operator? ConocoPhillips … and Hilcorp … in talks about operatorship.)

The deal will result in the ownership of the state’s main producing oil field, Prudhoe Bay, split three ways, with Conoco holding 36% working interest, ExxonMobil 36% and Hilcorp 26%.

Conoco alone owns more than 50% of current Alaska North Slope oil and natural gas liquids production. If it would take over as operator of Prudhoe Bay, the big independent would operate about 85% of all North Slope oil and NGLs, possibly spurring federal and state concerns about one company controlling the region and its facilities.

An (unconfirmed) 2014 agreement between BP, Conoco and Exxon that would allow Conoco to operate half the field and Hilcorp the other half might relieve some worries.

Here is what happened the last time a deal between oil companies threatened to leave the North Slope with one primary oil producer.

In mid-1999, BP Amoco and ARCO (Atlantic Richfield Co.) announced a merger agreement that would have included ARCO Alaska and its assets.

While the state of Alaska reached a comparatively easy settlement, the feds were more difficult to satisfy.

The debate that followed the merger announcement led to the Federal Trade Commission saying in February 2000 that it would seek a preliminary injunction in federal district court to prevent the merger of the two companies. FTC said the deal would, among other things, violate antitrust laws by lessening competition in the exploration and production of Alaska North Slope crude and its sale to West Coast refineries.

If the merger were allowed to proceed, FTC said, BP alone would control 75% of the production of ANS crude oil.

By mid-April 2000, the agency and the companies had settled their differences, the resultant agreement requiring BP to divest all ARCO's assets relating to oil production on Alaska's North Slope to Phillips Petroleum (or another FTC-approved purchaser). With limited exceptions, the divestitures had to take place within 30 days.

- KAY CASHMAN

Mull sits on Richfield Katalla well

ConocoPhillips ‘s predecessor Richfield Oil drilled two wells in the early 1960s near the abandoned Katalla oil field along the Gulf of Alaska.

The Katalla oil field had been in production from 1902 through 1933, yielding a total of 153,992 barrels of oil from 18 shallow wells that tapped the Poul Creek formation.

Processed at the Katalla oil refinery, the oil was poured into wooden barrels and transported by horse-drawn railway about a mile to the Katalla wharf for shipment to Cordova, where it was used in Copper River Railway locomotives as a lubricant.

Production stopped when the Katalla oil refinery burned down in 1933.

As for company lineage, Richfield merged with Atlantic Refining to become Atlantic Richfield Co. or ARCO, and then its Alaska arm, ARCO Alaska, was sold in 2000 to Phillips Petroleum, which later merged with Conoco to become ConocoPhillips.

Mull was reminded of Richfield’s Katalla wells when he read the Aug. 11 story in Petroleum News, “Back to Katalla for oil,” which reported on the state’s issuance of a preliminary finding on a 65,773-acre Gulf of Alaska exploration license for Cassandra Energy Corp. in the Katalla area.

Nikiski-based Cassandra also has a lease-purchase option on the 465-acre Katalla oil field with the Welch family of Cordova.

Between 1954 and 1963, industry came back to take another look at the region. Twenty-five new wells and core holes were drilled then, none of which discovered any commercial amounts of oil.

At the time, H.C. “Harry” Jamison, a young, mid-career geologist out of California, was administrative assistant to Mason Hill, Richfield’s manager of exploration.

In 1960, Jamison made his first trip to Alaska, tasked with doing troubleshooting on the Katalla-Yakutat project for Richfield with partners Sinclair and British Petroleum.

In early 1961, Richfield reorganized its Alaska operation, putting Jamison in charge as exploration supervisor for Alaska and the Pacific Northwest.

“It was Harry Jamison who sent me to Katalla,” Mull said.

In 1961, Richfield drilled the Bering River No. 1 well near Bering Lake, with a true vertical depth of 6,175 feet, penetrating the Tokun and Kulthieth formations. And in 1962, the company drilled the Bering River No. 2 well at Bering River; which Mull sat on. Its TVD was 6,019 feet, penetrating the Poul Creek and Tokun formations.

“We got some oil shows in the wells, but nothing else,” he said.

“What I remember most when I think of that drilling, which took place in the winter, is lots of rain and always being wet. … It was quite an experience for someone new to Alaska. It was my first well in the state.”

Both of Richfield’s wells were plugged and abandoned.

- KAY CASHMAN



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