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Another player needed State demands North Slope major operator, explorer to replace ARCO; wants BP Exploration (Alaska) to publish rates for facilities use Kristen Nelson PNA News Editor
Competition and corporate commitment are the goals of the state’s position on BP Amoco’s acquisition of ARCO — and competition means another major oil company both operating and exploring on the North Slope, Alaska Gov. Tony Knowles told the Anchorage Chamber of Commerce Aug. 23.
The governor appointed a cabinet-level task force to review the state’s issues after the acquisition was announced April 1. The state, he said, is in negotiation with BP on its requirements for the acquisition. If the state does not succeed in the negotiations, Knowles said its next step would be to oppose the sale before the Federal Trade Commission.
In the competition area, he said the state will insist on several conditions for BP Amoco’s acquisition of ARCO.
“BP must divest itself of sufficient North Slope production and leases to guarantee another major oil company operator in production and exploration,” Knowles said.
In addition to the 360,000 acres which BP Amoco would hold in excess of the state’s onshore 500,000-acre exploration limit, BP Amoco would also have to divest itself of some of its acreage in the National Petroleum Reserve-Alaska.
And, he said, “the state must agree in the selection of the excess acreage on state lands.”
Open access required In addition, Knowles said, there must be open access to oil transportation and production facilities “at a published, fair price” and both BP Amoco and Exxon-Mobil must agree to a reduction of the tariff on the trans-Alaska oil pipeline “so it is not a barrier to a non-owner company.”
The state will also, he said, insist that adequate reserves of Alaska’s North Slope natural gas be available at fair market rates for any sponsor of a natural gas project.
BP Amoco must continue with ARCO’s plans for new double-hulled tankers for service from Valdez. And the industry must assess and clean up all contaminated sites on the North Slope.
The state is also looking for good corporate citizenship. “It is time for BP to make a substantial education endowment to the University of Alaska for the technical training of young Alaskans and to build on our state’s internationally known expertise in Arctic environmental engineering,” Knowles said.
He also emphasized that the state expects a continued commitment by BP Amoco to hiring Alaskans and using Alaska companies.
State must agree on lands Knowles emphasized, in his remarks and in response to questions, that the state must agree on the land selected for divestiture, “who that is sold to and what the participation (percent is) and what the format is can take a whole variety of forms.” Knowles noted it could be anything from a cash sale to what is very common in the industry, “partnering with another partner with a partial ownership based upon the exploration wells being developed within a set amount of time… I think the goal is clear and beneficial both to the state and to BP.”
As to who a new major player would be, Knowles said “we’ll have to see who comes forward.”
“You can’t do this in 90 days” Ken Boyd, director of the Department of Natural Resources Division of Oil and Gas, told PNA after Knowles’ talk that he was concerned about the requirement in state statute that would only allow BP 90 days to divest itself of its excess exploration acreage.
Once the acquisition is complete, Boyd said, he is required by statute to send BP a notice that they have 90 days to divest land beyond the state’s 500,000-acre onshore exploration limit.
“You can’t do this in 90 days,” he said.
“And I don’t think they can do it ahead of time because they’re constrained by all the laws and merger stuff… I know they’re talking. But you’ve got to be careful how you talk. You can’t be making deals with ARCO acreage today.”
And, he said, if they wait until the deal is done, then there’s the 90-day statutory language. Boyd said he doesn’t think the statute contemplated a deal like this.
Combination of barrels and acres Boyd said there wasn’t a specific requirement on the operating side of the state’s demands. Basically, he said, a company would be buying barrels. For example, he said, maybe a company would buy enough of a field to have 100,000 barrels of production there.
“But,” he said, “I can see BP maintaining a piece of that. In other words, they don’t have to give up 100 percent… they could give up 75 or 80 percent” so that a new company becomes the operator, but BP is still there.
“Which I think is good, personally,” Boyd said, because BP has the experience.
“That’s the way I see it,” he said of bringing in a new major on the North Slope, “is some chunk of old acreage, a chunk of new acreage. And BP maintaining some part of that.
“But it has to be a package that’s attractive to a third party,” he said. As to who that third party would be, Boyd said he didn’t know. Draw up a list of the 10 largest companies in the world, he said, and throw in a couple of independents. Compact and contiguous Boyd said he thinks that “compact and contiguous packages of acreage are what’s attractive to a new player.” A new player, he said, isn’t going to be interested in individual small plays — or in $6 an acre stuff that’s basically moose pasture.
“So you concentrate on the higher, the better stuff. I think you try and put some packages of acreage together.
“BP’s already said they’re willing to throw in the seismic, which I think is an important feature… especially if BP is part of it because then it behooves them to want to share their interpretation.” BP looking for a win-win situation Richard Campbell, president of BP Exploration (Alaska) Inc., told PNA that BP has spent a lot of time over the past couple of months with the state and the Federal Trade Commission “providing lots of information and that’s been the basis for the state’s analysis.”
The next phase, Campbell said, “is to sit down with the state again and just work through the individual issues one by one.”
The goal he said, will be a win-win situation, with the win for the state “maintaining the synergies by virtue of the acquisition,“ allowing Alaska to be competitive and allowing BP to invest $5 billion over the next five years — which means more production for the state.
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