It will be late spring or summer before BP’s sign comes down on the company’s big midtown Anchorage office building. The keys will be turned over to Hilcorp Energy.
Hilcorp is buying BP’s Alaska oil and pipeline assets and will take the office building, too.
It’s a big $5.6 deal that includes the company’s share of the Prudhoe Bay oilfield, the Point Thomson gas field, prospective exploration acreage in the Arctic National Wildlife Refuge and almost half ownership of the Trans Alaska Pipeline System.
BP owns 26.32 percent of Prudhoe Bay; about 32 percent of the Point Thomson field; 50 percent of the Milne Point field and Liberty, an undeveloped offshore deposit and 48.4 percent of the Trans Alaska Pipeline System.
Hilcorp will also step into BP’s shoes as operator of the big Prudhoe Bay oilfield, which still supplies about half the oil moving down the oil pipeline, Alaska Natural Resources Commissioner Corri Feige told state legislators in a beefing last Monday.
“It’s not unusual for a company with a minority share (26 percent at Prudhoe) to become the operator,” Feige said. ConocoPhilips and ExxonMobil will be HIlcorp’s partners in Prudhoe Bay, and will be the majority owners.
Meanwhile, about 800 to 1,000 BP employees will start getting their paychecks from Hilcorp in 2020. BP spokesperson Meg Baldino said the majority of BP’s Alaska workers were offered jobs by Hilcorp which 342 accepted voluntary separations and 153 will continue working with BP in locations outside Alaska.
Two hundred and ninety-four employees are facing involuntary separations of which 237 are Alaska residents.
“These numbers will change as we continue to work with employees to help them find a role,” Baldino said in an e-mail.
“No one transfers to Hilcorp until the sale is final,” she said.
In the briefing to legislators Feige said the state is now deep into its analysis of the deal and Hilcorp’s technical and financial capabilities. Those are attracting interest because Hilcorp is a medium-sized company that has not operated an oilfield as big, or complex, as Prudhoe.
A consulting group, National Economic Research Associates, has been retained to help the state with an independent review of risks for the state associated with the sale, Feige said.
The DNR, as the manager of state lands, must take a determination that Hilcorp is able to handle its obligations as an oil operator on state oil and gas leases, she said. As state resources commissioner Feige must approve any transfer of interest in leases on state lands.
The Regulatory Commission of Alaska also has responsibility for ensuring that regulated facilities like TAPS are properly maintained and operated. Both agencies have a statutory responsibility to determine that Hilcorp is “fit, willing and able.”
The RCA now has a preliminary review of the BP-Hilcorp sale underway and will begin a formal review next spring that will likely include public hearings, Feige told the legislators. While the timing is uncertain for both the DNR and RCA reviews, which are separate, it’s considered likely that both agencies will make their decisions by midyear or possibly earlier, she said.
What legislators, and many in the public, are interested in is whether Hilcorp has the resources to handle a major problem such as a major oil spill from a well blowout on the slope or a pipeline break. “We must ensure that the Hilcorp corporate family has the financial capacity to fulfill its obligations to the state including those not realized for many years,” Feige said.
Hilcorp has agreed to provide annual audited financial and quarterly unaudited statements, she said, so that the DNR can be assured the company has adequate reserves. In this regard, the state already has a financial assurances agreement with Hilcorp and has has been receiving and reviewing the company’s financial statements since taking over Chevron Corp. and Marathon Oil producing assets in Cook Inlet in 2012 and 2013.
The state has just received the 6th amended and restated financial assurances agreement from Hilcorp, the commissioner said.
BP and Hilcorp also have obligations for removing oil facilities and restoring lands at Prudhoe Bay and ultimately dismantling the 48-inch TAPS line. Feige told the legislators that BP will retain its current responsibility for dismantling TAPS and will have “secondary” responsibility for removal of facilities and land restoration at Prudhoe Bay, meaning it will backstop Hilcorp if need be.
Hilcorp has also agreed to provide an independent estimate of the dismantlement and removal cost every three years, the commissioner said.
The most recent estimate for TAPS’ dismantlement and removal available to the public is $2.63 billion, estimated in 2005, but the actual cost would be far higher. Whatever it is the TAPS owners including Hilcorp and BP are obligated to pay it.