BP Amoco PLC struck a deal with Alaskan authorities that is expected to clear the way for its takeover of ARCO, but completion is now thought unlikely to be achieved by yearend, as intended.
BP Amoco's planned $26.8 billion absorption of ARCO has been approved by the European Union, but the move raised concerns with Alaskan authorities over dominance by one company of the state's exploration and production assets (OGJ, Nov. 1, 1999, p. 27).
Ahead of the agreement, Alaska Gov. Tony Knowles urged US Federal Trade Commission regulators to block BP Amoco's acquisition (OGJ, Nov. 8, 1999, Newsletter). But after the deal was clinched on Nov. 5, Knowles acknowledged that it would be to the benefit of Alaska.
To secure Alaska's approval, BP Amoco agreed to sell producing assets amounting to 175,000 bo/d of output, together with associated infrastructure, 620,000 acres of Alaskan exploration leases, and a 13% stake in the Trans-Alaska Pipeline System.
BP Amoco also agreed to make commitments on jobs and the environment. These latter points are likely to be key issues in a series of town hall meetings at which local people can air their concerns. The meetings will take place during the 2 weeks following the agreement.
John Browne, chief executive of BP Amoco, said the disposals would have minimal impact on the $1 billion of synergies anticipated worldwide from the combination of BP Amoco and ARCO.
"Most importantly," said Browne, "this agreement preserves our interests in the Prudhoe Bay field, including the single-operatorship. With the efficiencies we will achieve from that and the other assets we retain, we can still deliver over $140 million of the $200 million synergies we targeted from the Alaskan element of the combination. We also expect the value of the synergies we forego to be reflected in the price we get for the assets we sell."
The deal would enable BP Amoco to keep just over half of ARCO's current production in Alaska, roughly 175,000 bo/d. The company would also retain more than 1 million acres of exploration territory on the North Slope, including 430,000 acres in the newly opened National Petroleum Reserve-Alaska
BP Amoco expects to divest ARCO's operatorships in Kuparuk River and Alpine fields, with the 175,000 b/d reduction in oil production coming primarily from Kuparuk.
The company also agreed to make up to 1.2 bcfd of North Slope natural gas available to commercial projects at competitive prices. The deal includes commitments to pay for environmental cleanups, to support local producers, and to hire local staff, as well as to donate $8 million/year to social projects.
BP Amoco expect to begin the process of selling off the assets almost immediately by setting up data rooms for interested oil companies to access. A company official said virtually every major oil company has expressed an interest in some or all of the assets.
While the Alaska deal is viewed as the clearance of a major obstacle to the takeover, BP Amoco now anticipates the move may not be completed by yearend because of delays within the FTC.
Browne said, "It's going to be tight." He added that the FTC's preoccupation with the merger of Exxon Corp. and Mobil Corp. means the commission does not have enough staff to study BP Amoco's deal at the same time: "We're conscious that we're very much the second cab off the rank here."
BP Amoco Deputy Chief Executive Rodney Chase said, "It was never going to be just about Alaska; there will be some downstream issues as well in the US. We haven't been able to attract their [FTC's] attention for detailed talks."