On Tuesday BP announced that it’s selling, for an undisclosed price, 15 percent of its Alaska assets to Hilcorp, one of the largest independent, privately-held oil companies in the United States. The fields it’s selling are Endicott and Northstar. It’s also selling half of its interests in the Liberty and Milne Point fields.
All told, the fields currently produce about 20,000 barrels of oil a day, only a fraction of the 520,000 or so daily barrels of oil produced from all North Slope fields, including Prudhoe Bay. But it’s a lot for a smaller company like Hilcorp, which all told produces about 85,000 barrels a day.
Hilcorp is not a stranger to the state. It made a big move into Alaska in 2011 and 2012, acquiring assets in the Cook Inlet from Chevron and Marathon Oil.
In a statement, Janet Weiss, President of BP Alaska, said that the deal would free up BP to focus on Prudhoe Bay, still the largest oil field in North America, and to advance “the Alaska LNG opportunity.”
The Alaska state Legislature just passed legislation to advance the up-to-$65 billion large diameter natural gas pipeline, which would carry gas from the Slope some 800 miles to tidewater in Southcentral Alaska.
The assets were likely more attractive to Hilcorp after the Legislature passed oil tax reform last session, which significantly lowers the state take on oil when prices are high. The sale will likely provide fodder for those who are working to repeal the oil tax, which voters will vote on in August. So far, the oil companies, including BP, ExxonMobil and ConocoPhillips have spent more than $6 million campaigning against the repeal.
Shortly after the announcement, state Sen. Hollis French, who is running for lieutenant governor and has been one of the most vocal advocates of repeal, said that BP “cashed out in Alaska, proving once again that oil taxes do not dictate the operations of global energy producers.”
Others see it differently. Several elected officials issued press releases and made statements in support of the sale. Bill Walker, who is running for governor as an independent, was also positive about the sale. “We need a whole bunch more companies like Hilcorp,” he said.
For one, they are committed to local hire, Walker said. Secondly, they’re likely to be more aggressive in producing oil.
Independents are generally more nimble and quicker than major oil companies, which can sit on assets to work on other, more attractive oil plays in other parts of the world.
Too, many have long argued that the three major oil companies’ stronghold on the North Slope has hindered development by scaring independents away. After BP acquired ARCOs’ assets in 1999, a Charter Agreement signed by BP was supposed to help give independents access to the Slope. But the majors are still not known for being particularly friendly in allowing access to their facilities.
Last year, during legislative testimony on the new oil tax regime, Bill Armstrong, president of Armstrong Oil & Gas — a North Slope lease holder that has attracted Pioneer, ENI and Repsol to the Slope — was asked about his company’s relationship with the majors. Armstrong likened it to the abusive relationship between Ike and Tina Turner. “We’re Tina,” he said.
Contact Amanda Coyne at amandamcoyne@yahoo.com
This is good news as is the resumption of export of gas from Cook Inlet which creates a market for local gas production. I understand that we are actually realizing more revenue under SB21 at current oil prices. The key is increased oil production. Regardless of tax rates, without production there is no revenue .
Gas is important but oil pays the bills. A local talk show host uses an excellent analogy comparing silver and gold to gas and oil. Silver is valuable yet not nearly as valuable as gold. The same can be said for gas and oil; however, both gas and oil are non-renewable resources and that fact has yet to dawn on our state government who wants to spend more than save while hoping for just one more producing well.
I really enjoy and appreciate your blog. Every time I visit your site and walk away, I feel a little smarter from the perspective and analysis you provide. Your writing is very intelligent and meaningful. Some reporters in this town write too many words that say and mean too little. Your words are to the point andshare a perspective that few of your colleagues are even aware of. II’ve become so addicted to your site that I can’t even imagine what this election cycle would be like without your blog.
I was born a Democrat in Oklahoma with oil in my veins. Not really sure how or when oil became a partisan issue in Alaska. The fact that it has is a sad commentary for our state. I believe that SB 21 is working. I work with an oil field service company and can say based on first hand experiemce that the Slope is as busy as I’ve ever seen it. The BP asset sale to Hillcorp is great for the economy and our state. This too is a testament to the fact that SB 21 is working. Alaskans should see this transaction as a win–win situation. BP will focus their energies and investment on Prudhoe and LNG. Hillcorp will aggresively pursue the exploitation of the resources they acquired from BP in quick order. All good for Alaska. Hollis French isn’t a dumb guy; unfortunately, he letks his emotions and hatred of the oil companies get in the way of rational thoughts and good decision making. If you care about this state, I would urrge you not to support candidates like Hollis French. It just doesn’t make sense to elect politicians that hate our state’s biggest industry and revenue producer. Us Democrats need to find ourselves another Tony Knowles. Like me, he too was born in Oklahoma with some oil in his veins too.