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FTC Signs Off Agency agrees to BP Amoco combination with ARCO, subject to acquisition by Phillips Petroleum of ARCO Alaska; companies align Prudhoe Bay oil and gas interests Kristen Nelson PNA News Editor
After stumbling for more than a year along a road strewn with objections — federal, state and private — Alaska’s North Slope oil industry has taken a decisive step onto a new path. It is a path few could have predicted at the end of March 1999, when BP Amoco said it had been approached by ARCO to buy the company and had made an offer to purchase the worldwide properties of its North Slope partner and rival for $27 billion.
The April 13 announcement by the Federal Trade Commission that it would approve BP Amoco’s acquisition of ARCO subject to divestiture of ARCO Alaska to Phillips Petroleum Corp., and a concurrent announcement by major present and future Prudhoe Bay owners (ARCO, BP, ExxonMobil and Phillips) that they were aligning their oil and gas interests in the field, is a major change at Prudhoe Bay.
BP Amoco cited Alaska cost savings as a major outcome expected from its initial plan to purchase all of ARCO’s worldwide assets. Those North Slope synergies were lost when BP Amoco was forced to agree to divest ARCO Alaska, but under the agreement between the major Prudhoe Bay owners, BP Exploration (Alaska) Inc. will operate Prudhoe Bay — reducing costs by eliminating the two operators which the field has had since development began. Aligning the commercial interests of the field’s owners eliminates the source of costly and sometimes public battles between Prudhoe Bay oil and gas interests.
Initial plan a no-go The initial plan — BP Amoco buys all of ARCO — was changed by the companies’ 1999 agreement with the state to bring in a strong competitor. The FTC said the BP Amoco-ARCO combination, even with Alaska’s compact with the companies, would have anticompetitive effects. The proposal to sell ARCO Alaska to Phillips Petroleum smoothed the path for completion of the deal — essentially replacing ARCO Alaska with Phillips.
Then the deal ran afoul of ExxonMobil concerns about the impact of Phillips as operator of half of Prudhoe Bay on ExxonMobil’s interests in the field.
When the parties finally stepped away from the negotiating table for the last time they had achieved one goal the owners have been working toward — a single operator at Prudhoe Bay — and one goal that has seemed unachievable — an alignment of oil and gas interests at Prudhoe Bay which eliminates commercial conflicts between those who gained most from oil development and those who gained most from gas development. Each major owner’s share in the field (voting rights on projects) will now include both oil and gas — in equal measure. And in addition to having a single operator, Prudhoe Bay will now be a single unit, instead of two participating areas.
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