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Big Oil seeking deal for one company to run oil field operations

Posted: Friday, April 07, 2000

ANCHORAGE - Exxon, BP Amoco and Phillips Petroleum are negotiating an agreement to have one company instead of two operate the huge Prudhoe Bay oil field.

One operator may mean more investment and more production at the huge oil field, experts say. But it would also likely mean scores of layoffs.

On Wednesday in Washington, D.C., Gov. Tony Knowles said an agreement on a single-company operation is imminent, expected within a few weeks, said Knowles spokesman Bob King.

Currently, BP and Arco Alaska Inc. each run half of the Prudhoe field. With 13 billion barrels, Prudhoe Bay is the largest oil field in North America.

Knowles suggested a single operator would be acceptable to the Federal Trade Commission, which is reviewing the BP takeover of Atlantic Richfield Co. The FTC will approve the takeover in the coming weeks, Knowles said.

BP intends to sell Arco's Alaska properties to Phillips to end FTC concerns about concentration of ownership on Alaska's North Slope.

Exxon, the second largest owner of Prudhoe oil, has filed suit to halt the Arco Alaska sale until it can look over the deal.

Arco Alaska spokeswoman Dawn Patience confirmed that negotiations are under way. She declined comment on whether those negotiations are about one operator at Prudhoe Bay.

BP Alaska spokesman Ronnie Chappell refused to comment about negotiations.

There is no word on which company would operate the field.

How many layoffs it would cause is difficult to know, said Harold Heinze, former Arco Alaska president.

In BP and Arco, there is obvious overlap in administrative and support workers at Prudhoe Bay. But other field services, such as drilling and transportation, were consolidated years ago.

``We're probably not talking hundreds of people,'' Heinze said.

Revenue Commissioner Wilson Condon said if one company can operate Prudhoe, costs could fall and investment in the field could rise.

Moving to a single operator may also equalize Prudhoe oil and gas ownership among the companies. BP, Arco and Exxon now have different interests in the oil and gas. Different ownership leads to different incentives, costly negotiations and slowed development at the field, Condon said.

For example, due to differing ownership of oil and gas at the field, BP pays about $3 to produce a barrel of oil, Condon said. By comparison, Arco and Exxon pay about $1.

``If they even out differences, we could see more expeditious development,'' Condon said.



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