Eni enters Alaska

20 years ago this month: Houston affiliate of Italian mega-major buys Armstrong's North Slope assets

Kay Cashman

Petroleum News

Editor's note: This story first appeared in the Aug. 28, 2005, issue of Petroleum News.

Eni Petroleum Exploration Co. has purchased the assets of Armstrong Alaska, which include 104 oil and gas leases on the North Slope where Eni said "reserves are expected to exceed 170 million barrels." The leases encompass 341,500 gross (273,000 net) acres onshore and offshore in state and federal waters. As part of the deal Eni will inherit Armstrong's minority working interests with Pioneer Natural Resources and Kerr-McGee in northern Alaska, including the proposed Oooguruk and Nikaitchuq developments.

(See map in the online issue PDF)

An affiliate of Italy's Eni SpA, Houston-based Eni Petroleum told Petroleum News Aug. 26, 2005, that it considers the "North Slope and Beaufort Sea as areas with exploration potential for new finds" and said Eni has "decided to establish a position in the area with an emphasis of consistent growth."

When asked if it is looking for other oil and gas properties in Alaska -- and anything outside of northern Alaska -- the company said it is "always looking for opportunities to further enhance its competitive presence in the areas where it operates. Alaska is no exception and Eni will consider all opportunities available and continue to invest in regional studies to assess the potential of new areas, with special attention to the Beaufort and Chukchi sea areas."

In response to written questions from Petroleum News, Eni wrote that it is "evaluating" whether to set up an office in Alaska. The company has not yet selected a person to oversee its Alaska assets but said if an Alaska coordinator is named that person would report to Eni Petroleum's Houston office which "manages E&P operations in (the) Gulf of Mexico and will also manage the operations in Alaska."

Although Armstrong was the first company to cut a deal with Eni in Alaska, Eni made its decision to enter Alaska "based on its internal studies and evaluation, while keeping a close eye on all the available opportunities. In addition, Eni intends to leverage the experience gained from its operatorship in other challenging areas such as Kazakhstan, where there are similar requirements for high levels of technology, as well as analogous operating conditions."

Eni's comparison of Alaska to Kazakhstan could bode well for Alaska. Eni operates Kazakhstan's huge Kashagan field in the Caspian Sea. Since it entered Kazakhstan in 1992 (10 months after the country's independence from the former Soviet Union), Eni has made itself part of the new nation's future. Among other things, Eni undertook the expense of training some of Kazakhstan's new oil ministry employees at its headquarters in Italy and it funded the construction of the Kazakh national library.

When asked if Eni plans to be an operator in Alaska, the company said it operates in other Arctic areas, and "generally takes a leadership role in its joint ventures worldwide."

Initially, Eni said it "intends to fully cooperate with its partners who operate some projects in the pre-development stage. It is Eni's intention to bring its experience onboard while taking the time to understand the peculiarity and challenges of the area." The company has not yet decided whether it will drill any of its 100%-owned acreage this coming winter: "It is too early to comment. This will be evaluated during our 2006 budget and planning process."

Although Eni said it will evaluate the possibility of partnering with Shell on Shell's planned Beaufort Sea seismic shoot for next summer, no decision will be made until Eni has completed its 2006 budget and planning process.

In Alaska "as in all of its activities, Eni is fully committed to sustainable development and environmental protection of the areas in which it operates. In the Gulf of Mexico, Eni has received several nominations for Safety Awards from the Minerals Management Service," the company said in its correspondence with Petroleum News.

Eni did not disclose the terms of its deal with Armstrong.

And when asked if it was looking at buying EnCana's acreage in Alaska, Eni said no.