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ExxonMobil sues to block ARCO Alaska sale to Phillips The April resolution of the dispute described below led to the alignment of oil and gas interests at Prudhoe Bay by the major owners Kristen Nelson PNA News Editor
Exxon Mobil Corp. filed suit March 24 in Los Angeles to block the purchase of ARCO’s Alaska assets by Phillips Petroleum Co.
ExxonMobil said that it has contractual rights to first refusal on some of the assets and concerns over operatorship. ARCO Alaska and Exxon have been the principal gas owners in the Prudhoe Bay unit; BP is the principal oil owner. Operatorship at the field is currently split between BP and Arco and a single ownership has been discussed to lower costs at the field.
The $7 billion deal between Phillips, BP Amoco and ARCO for the sale of all of ARCO’s Alaska assets was announced in Anchorage March 15 to settle concerns the Federal Trade Commission had over the acquisition by BP Amoco of ARCO.
State opposed to action Bob King, spokesman for Gov. Tony Knowles, said March 27 that the state “would be very opposed to any action that would slow resolution of the merger.” The Alaska Department of Law, he said, still has the suit under review.
“Alaska is not named in this case,” King said. “It’s just between the companies so it’s not certain what effect it will have.”
BP Exploration (Alaska) Inc. spokesman Ronnie Chappell said: “The agreement in question is an agreement between ARCO and Exxon; ARCO has confirmed to us that ExxonMobil has no preferential rights with regard to this transaction.”
ARCO Alaska spokeswoman Dawn Patience said that North Slope rights of ARCO and Exxon date back to the Arctic Slope Agreement signed in 1964 between Richfield and Humble Oil (predecessors of ARCO and Exxon). ARCO Alaska Inc. was formed in 1980 and rights in the agreement were transferred to ARCO Alaska in 1981, Patience said.
“ARCO Alaska Inc. is a separately incorporated company and its stock is owned 100 percent by the Atlantic Richfield Co,” she said.
“Exxon has no preemptive rights in these circumstances under the Arctic Slope Agreement,” Patience said, “because what’s happening here is the sale of the stock of ARCO Alaska Inc and that doesn’t trigger the rights that Exxon claims. And ARCO Alaska Inc is the party to the Arctic Slope agreement, not Atlantic Richfield.”
ExxonMobil concerned about operatorship In a statement, ExxonMobil said that it is particularly concerned about operatorship, and noted that contracts and agreements addressing preferential rights, operatorship and governance processes date back to 1964, “and have governed more than 35 years of successful exploration, development, production and other business activities among the parties. They also provide,” ExxonMobil said, “for an orderly transition when one of the companies no longer operates the joint assets.”
ExxonMobil said it has “had ongoing discussions with the relevant parties on these matters. Since these discussions have not resulted in a satisfactory resolution, ExxonMobil has filed a lawsuit seeking a preliminary injunction against BP Amoco, ARCO and Phillips Petroleum to ensure that its interests are protected.”
ExxonMobil noted that the Prudhoe Bay agreements “are complex and provide for a unique split in equity ownership between the ‘oil rim’ equity owners, represented primarily by BP Amoco, which owns most of the oil, and the ‘gas rim’ group, represented by ExxonMobil and ARCO, which own most of the gas.
Historically, ExxonMobil’s and ARCO’s interests have been aligned and have worked to balance and promote sound development and operational decisions between the oil rim and gas rim equity owners, who may sometimes have differing views. The elimination of ARCO and selection of a new partner by BP Amoco — on terms we are not aware of — devalues ExxonMobil’s interests.”
In addition to preferential rights, ExxonMobil said, it wants a careful and thorough evaluation of operatorship. “Our company has invested billions of dollars in the development of the North Slope resources and we believe it is essential that an operator in this challenging environment demonstrate both a broad, worldwide experience and a continuous investment in technology in order to provide prudent management of those resources. ExxonMobil will work to ensure the long-term and efficient operation of the fields for the maximum benefit of the companies involved, the state of Alaska and its residents.”
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