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Phillips completes ARCO Alaska acquisition Kevin Meyers named president, CEO of Phillips Alaska; new company will be Alaska’s largest producer in combined oil and gas Kristen Nelson PNA News Editor
Calling it a “very historic and significant event” in the 83-year history of the Phillips Petroleum Co., Jim Mulva, the company’s chairman and chief executive officer, said in Anchorage April 26 that Phillips has completed its acquisition of ARCO’s Alaska businesses.
“It’s the largest transaction that we have ever completed in the company.” The company’s hydrocarbon reserves around the world are essentially doubled, Mulva said, from 2.2 billion barrels of oil equivalent to 4.4 billion BOE.
The company’s worldwide production has been increased by a little more than 60 percent, to a base of about 490,000 barrels of oil equivalent a day, about 340,000 BOE have been added.
“Based on this transaction and the barrels of oil equivalent of production that Phillips already has in Alaska, it makes Phillips Alaska the largest producer of barrels of oil equivalent production in Alaska.” Phillips Alaska has around 40 percent of total production from Alaska.
In addition to Prudhoe Bay production, Phillips Alaska owns 55 percent of the Kuparuk River field and also produces natural gas in Cook Inlet. Production from the Alpine field west of Kuparuk is scheduled to begin later this year.
Upside potential The new company will be called Phillips Alaska Inc. and Mulva said Kevin Meyers, head of ARCO Alaska Inc., had been named president and chief executive officer of Phillips Alaska.
Mulva said Phillips was very excited about the upside growth potential. “Alaska now becomes the largest geographic area of exploration-production business for the company around the world,” he said.
There are a number of areas of upside potential, Mulva said. There were eight exploration wells in Alaska this winter he said, and Phillips expects to have a stronger exploration effort in subsequent years.
Phillips also sees upside potential exploitation of known oil resources, “a great deal of promise” from the exploration acreage the company now holds in Alaska; and a great deal of potential for gas development, which could come from gas to liquids, liquefied natural gas or a pipeline to the Lower 48. Mulva said the company would be aggressive in pursuing gas development in Alaska.
All gas options Meyers said that Phillips Alaska will continue the gas development programs that both ARCO and Phillips have in place. Both companies, he noted, are part of the sponsor group for the LNG project. In addition, ARCO was looking at gas to liquids tests and will continue to evaluate GTL technology. And, he said, Phillips Alaska will be looking at a gas pipeline to the Lower 48.
“So the bottom line is, our objective is to sell gas,” Meyers said. “We want to make money off the gas. So we’re open to any vehicle that permits us to do that, whether it be GTL, LNG or a pipeline project to the Lower 48 or all of the above. We have a substantial gas resource up there that can probably service a combination of those markets.”
“I have a belief that we’ll see gas getting to market by the end of this decade,” Meyers said: “I’ve always felt that was the case.”
But, Myers cautioned, “we still have a lot of work ahead of us in that we don’t have an economic project yet. That’s the goal. We have to be able to make money on it. The state wants us to make money. We need to make money on the investment. But we’re making progress.”
Mulva said Phillips is “going to dedicate the time and the resources — both in people and in money — to aggressively review all alternatives so as to play a leadership role with respect to gas development and to do this as quickly as we can.”
He also said that it was his opinion that “there’s going to be a real need for gas (in the Lower 48), probably more quickly than we expect if this whole supply/demand situation tightens.” If that supply/demand tightening occurs, he said, it should have a beneficial impact on opportunities to commercialize North Slope gas.
Three big opportunities Meyers said he sees three big potentials on the North Slope — one of which is gas. The second, he said, is heavy oil reserves in Kuparuk.
“There’s probably about 20 billion barrels plus in place of heavy oil that we’re looking to monetize,” he said. The third opportunity, he said, is exploration.
“And when you look at exploration,” Myers said, “that’s NPR-A, as well as the central North Slope and hopefully one day with a little cooperation from the government … ANWR.”
Right now, he said, “our energies are focused on the central North Slope and NPR-A because we do have access to that today and we do have acreage to explore.”
Mulva said that one of the things Phillips sees “that is a real positive aspect of this acquisition is our ability to take and to share the best of experience and practices — what we’ve done around the world at Phillips — with what’s been done historically up here in Alaska.” The company will be sharing, he said, that exploitation and secondary recovery experience and expertise. The hope, he said, is that “ that will lead to even more recovery, secondary recovery, and exploitation and adding reserves and production…” Phillips also sees, he said, opportunities for Phillips Alaska employees to share their expertise with Phillips worldwide, and opportunities for Phillips’ worldwide employees to bring their expertise to Alaska.
Common culture between companies Mulva noted that over the last month or so Phillips has found “that there’s a very common culture with respect to operations thinking” and long-term views between Phillips and employees of what is now Phillips Alaska. The companies, he said, have a combined experience in Alaska of 90 years.
“So we have a similar view and culture,” he said.
“We like long-term relationships.” And Mulva said that historically, Phillips has had a “nice strong relationship with ARCO.”
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