|
Hilcorp buys remaining 50% of pipeline
Kristen Nelson Petroleum News
Hilcorp Alaska is adding to its infrastructure in Cook Inlet, buying the 50 percent interest in Cook Inlet Pipe Line Co. that it doesn’t already own from Pacific Energy Alaska Holdings, which has been in bankruptcy since 2009, the Regulatory Commission of Alaska said in a Dec. 4 notice.
The companies need RCA approval to transfer Pacific Energy’s 50 percent ownership in the certificate of public convenience and necessity for the line.
Hilcorp Alaska acquired 50 percent interest — and operatorship — of the line when it purchased Union Oil Company of California’s Cook Inlet assets, a sale which closed in January.
The 42-mile pipeline transports crude oil from the Granite Point, McArthur River, Redoubt Shoal and Trading Bay fields to the Drift River Marine Terminal, which is also owned by CIPL. In addition to the pipeline and terminal, CIPL owns lateral pipelines and a tanker loading platform and pipelines connecting to that platform, RCA said.
When Hilcorp Alaska acquired Union Oil’s assets in Cook Inlet it acquired a 50 percent interest in CIPL, oil and gas production properties and Union Oil’s interests in two natural gas pipelines, Cook Inlet Gas Gathering System and the Kenai Kachemak Pipeline. RCA approved transfer of those ownership interests from Union Oil to Hilcorp in December 2011.
In addition to the Union Oil Cook Inlet properties, Hilcorp has an agreement with Marathon Oil Co. to acquire that company’s Cook Inlet producing properties as well as Marathon’s interests in four Cook Inlet natural gas pipelines, subject to regulatory approval. RCA recently approved applications to transfer Marathon’s pipeline interests.
Voting interests assigned Pacific Energy abandoned its rights in CIPL stock in 2010 and the voting interests in CIPL were assigned to Union Oil, which continued operations.
RCA said that Hilcorp Alaska and Pacific Energy agreed Sept. 13 that Hilcorp would acquire Pacific Energy’s Cook Inlet interests including its 50 percent interest in CIPL. The Bankruptcy Court approved the purchase on Nov. 5, RCA said. (Hilcorp has also acquired Pacific Energy interests in leases at the Trading Bay unit — see lease update story in this issue.)
Upon commission approval of the Hilcorp acquisition, Hilcorp will continue the operation of CIPL assets, RCA said.
The commission said it has already found Hilcorp Alaska to be “qualified, willing, and able to own and operate the CIPL” in accordance with the Alaska Pipeline Act and its own requirements, and said day-to-day operations of CIPL will not change as a result of the proposed acquisition. Hilcorp has been operating CIPL for more than a year.
Projected life The 42-mile pipeline has a diameter of 20 inches, and was designed with a flow rate of 225,000 barrels per day, although its peak capacity was 140,000 bpd in 1970.
In a state settlement in 2008 the projected life of CIPL was 2014, but RCA said “CIPL anticipates operating the pipeline beyond that time,” RCA said.
“In fact, CIPL has reached a preliminary agreement with the State of Alaska to extend the life of the line to 2021 and is working to finalize the documentation for that agreement. The Pipeline’s remaining economic life will be determined by the length of time crude oil is tendered to the Pipeline, in economically sufficient quantities, for transportation from Pipeline-connected producing fields and facilities,” RCA said.
Because Hilcorp Alaska is a current owner of CIPL, the Alaska Department of Natural Resources does not require prior approval for transfer of Pacific Energy’s interest in right-of-way agreements to Hilcorp.
Hilcorp Alaska paid $6.8 million for the CIPL assets and agreed to release a $21 million CIPL claim against Pacific Energy; it also paid $50,000 for Pacific Energy’s 20,000 shares in Cook Inlet Pipe Line Co.
| 