North Slope workers at Prudhoe Bay are not yet clear what company name will be on their hardhats next year when the oil field changes ownership.
ConocoPhilllips and Hilcorp Energy are in discussions on which company will operate field on Alaska after the sale of BP assets in Alaska to Hilcorp closes, which is expected in 2020. Hilcorp has agreed to purchase Alaska holdings of BP include the company’s interest in Prudhoe Bay in a $5.6 billion deal.
BP is now the operator at Prudhoe and it was widely assumed that Hilcorp would assume BP’s role as operator, or the company which manages the field and hires workers. However, it’s now possible that ConocoPhillips, which owns a part of Prudhoe, might become operator.
“BP is the operator until the transaction closes. In the meantime, we will be having conversations with Hilcorp regarding operatorship,” ConocoPhillips spokeswoman Patty Sullivan said in an email. Hilcorp did not return a call asking for comment.
ConocoPhillips and ExxonMobil Corp. both have larger stakes in Prudhoe Bay than BP with 36% of the field held by ConocoPhillips. 36% by ExxonMobil and 26% by BP, with the remainder held by very small owners. Traditionally, companies with the larger share of producing fields are designated as field operators but Prudhoe’s history is unusual. When the field was developed In the mid-1970s it was decided that BP and ARCO Alaska, predecessor to ConocoPhillips, would jointly operate Prudhoe because both companies shared in the original discovery and field development.
Later, when the field’s oil and gas holdings were merged (they were previously managed separately) BP took over as single operator.
While still a major owner at Prudhoe, the arrangement enabled ConocoPhillips to focus its attention on the Kuparuk River and Alpine fields west of Prudhoe, where it is operator, and more recently to exploration in the National Petroleum Reserve-Alaska, where the company has made discoveries.
Hilcorp is now operator at three small producing fields on the North Slope including Northstar and Endicott, two offshore fields 100% owned by Hilcorp, and the onshore Milne Point field, which is owned 50-50 by Hilcorp and BP. Hilcorp and BP also share ownership in Liberty, an undeveloped offshore oil deposit, where Hilcorp is operator and is planning development. The company also owns and operates Cook Inlet oil and gas fields acquired from Chevron Corp. and Marathon Oil in 2012 and 2013.
Hilcorp has long been established in the U.S. gulf coast, where it developed a reputation for purchasing mature producing assets from larger companies and engaging in aggressive investment and redevelopment. Since 2012 the company has increased production at Cook Inlet’s fields, some a half century old, from 10,000 b.d to about 16,000 barrels per day.
Despite that track record there have been questions in Alaska as to whether Hilcorp, as a smaller company, has the capacity to manage the entire Prudhoe operation, which includes the world’s largest gas production and injection plants as well as substantial waterflood and enhanced oil recovery projects. However, others in the state point to Hilcorp’s track record of redevelopment and increasing production in Cook Inlet and, more recently initiating new projects and production at Milne Point, as examples of what the company could do in Prudhoe Bay, which still produces about half of the oil shipped from the slope through the Trans Alaska Pipeline System.
The talks with ConocoPhillips reportedly involve the larger company operating the western part of Prudhoe and Hilcorp the eastern part, which is adjacent to existing Hilcorp operations at the Milne Point and Endicott fields. Such a split operation would still fit the field infrastructure. In the 1970s and 1980s BP operated the western half of Prudhoe and ARCO Alaska the east side, with separate pipeline systems and processing plants built for the west and east sides.
Alternatively, ConocoPhillips could become operator of the entire Prudhoe field. Field operations are typically more efficient under one operator.