Unocal purchase puts Alaska assets in question

The Associated Press

ChevronTexaco’s decision to buy Unocal Corp. has industry observers in Alaska wondering whether a combined company will stick around as a significant oil and gas player.

Executives for Chevron, one of the world’s largest petroleum powers, indicated April 4 they intend to dispose of more than $2 billion worth of assets after the close of an $18 billion buyout of smaller Unocal.

Those assets might include Unocal’s most visible Alaska property, its string of 10 aging oil platforms in Cook Inlet, according to Alaska observers.

“We don’t know what they’re going to do with the Cook Inlet assets yet, so it’s a little premature to say this is a good or a bad thing,” said Bill Popp, the oil, gas and mining liaison with the Kenai Peninsula Borough.

He said “rumors are flying” that Chevron might spin off Unocal’s Cook Inlet properties as noncore assets.

The fate of Unocal is of great interest for Kenai Peninsula residents. The company is Cook Inlet’s top oil producer and tops the borough’s property-tax rolls, contributing more than $2.8 million this year, Popp said.

“We’ve got a lot of Unocal families down here, past and present,” he said.

Ken Boyd, a former state oil and gas director now working as an oil industry consultant, agreed that Unocal’s Alaska assets might not ultimately find a home in giant Chevron’s portfolio.

Unocal’s oil platforms are old and their fields are near the end of their lives, he said. Chevron might be more interested in Unocal’s natural gas properties, including its recent and sizable Happy Valley discovery southeast of Ninilchik.

“Is that big enough to fit their pistol? It’s kind of on the low end for what a company of that size is looking for,” Boyd said.

Company executives said April 4 they expect to complete full integration of Chevron and Unocal within six months after regulatory approval of the deal.

Chevron could spinoff Alaska properties

XTO Energy would be a likely fit for the company’s Cook Inlet oil interests and Marathon Oil a fit for its onshore gas assets, but an executives from both companies told Petroleum News that absolutely no deal was being discussed.

Unocal has about 300 employees statewide and its history spans Alaska’s modern oil and gas era. Unocal discovered the prolific Kenai gas field in 1959, the year Alaska became a state, and went on to become Cook Inlet’s leading offshore oil producer. It still runs the Swanson River field, site of Alaska’s first major oil discovery.

The company also took a minor role in the state’s main oil province, the North Slope. Unocal holds a nearly 5 percent stake in the giant Kuparuk oil field and a 10 percent interest in the smaller Endicott oil field. Unocal also owns about 1.4 percent of the 800-mile trans-Alaska oil pipeline.

Chevron and Texaco, which completed a merger in 2001, also have a deep track record in Alaska.

Chevron ran a small oil refinery at Nikiski but closed it down in 1991, citing increased state and federal regulatory costs.

The two companies were ambitious North Slope explorers for a time, drilling exploratory wells in the ice-choked Chukchi Sea and elsewhere in the late 1980s. Those holes yielded mainly disappointment.

Until 1994, Chevron held a big piece of the Milne Point oil field, now owned and run by BP.

Chevron and BP teamed in 1986 to drill the KIC well, the only exploratory well ever drilled on the coastal plain of the Arctic National Wildlife Refuge. Results of that well remain secret.

Chevron still holds a major interest in the Beluga gas field on the west side of Cook Inlet. The field helps fire the Chugach Electric Association power plant that lights up the Anchorage region. Chevron also holds tiny shares of North Slope oil fields including Prudhoe Bay and Kuparuk.

—Petroleum News contributed to this article