ConocoPhillips puts Inlet fields up for sale

ConocoPhillips is getting out of the natural gas production business in Cook Inlet.

The company has put its Inlet gas assets up for sale and plans to open a data room for prospective buyers.

However, the company’s liquefied natural gas plant at Nikiski is not included in the assets for sale, company spokeswoman Amy Burnett said.  

Included in the offering are the North Cook Inlet field, which has historically been the main supplier of gas to the LNG plant, although most of the gas to the plant to support ConocoPhillips’ LNG exports now comes from other producers, Burnett said.

Also to be sold is ConocoPhillips’ interest in the Beluga gas field, where the company is also the field operator.

ConocoPhillips is one-third owner in the Beluga field. Other owners are Hillcorp Energy and the Municipality of Anchorage.

“While historically significant to the company’s investment in Alaska, the North Cook Inlet and Beluga River units are mature fields that are no longer considered core to Alaska operations. The focus will be on the company’s current North Slope operations, including the Alaska LNG project,” according to a ConocoPhillips press release.

“ConocoPhillips believes the North Cook Inlet and Beluga River units are important assets that offer good opportunities for the right buyer. Development of a data room for the sale is in progress, and is expected to open in early August.”

Larry Persily, oil and gas advisor to the Kenai Peninsula Borough, said he wasn’t surprised that ConocoPhillips would shed older, mature properties in order to focus on new opportunities. What is more interesting is who might purchase the assets, he said.

A logical interested party would be Hilcorp Energy, which has expanded aggressively in Cook Inlet after purchasing Chevron Corp. and Marathon Oil properties in 2012 and 2013, Persily said.

Other potential buyers could include Enstar Natural Gas Co., the regional natural gas utility, or other, out-of-state firms reported to be now investigating opportunities to supply gas to Interior Alaska.

However, Hilcorp is already the largest owner of natural gas in Cook Inlet and the major supplier to regional utilities.

“Purchasing ConocoPhillips’ holdings would give them overwhelming dominance that the State of Alaska may object to,” Persily said.

Ownership in the Beluga gas field is now split between Hilcorp Energy, the Municipality of Anchorage and ConocoPhillips owning one-third each. If Hilcorp were to buy ConocoPhillips’ holdings in Beluga it would own two-thirds of that field, which supplies gas to regional utilities.

That may be of concern to the utilities and to the state. The Department of Natural Resources must approve any transfer of state leases at the North Cook Inlet and Beluga fields.

There is precedent for the state moving to block a company’s acquisition of oil and gas resources to be in a dominant position. In 1990, former Gov. Tony Knowles objected to BP’s acquisition of ARCO Alaska’s assets in on the North Slope, which led to ARCO’s sale to Phillips Petroleum, now ConocoPhillips.

A small Japanese consortium now planning a medium-sized LNG plant at Point MacKenzie, Resources Energy Inc., has also been looking to acquire a Cook Inlet gas supply and may be a potential purchaser.

A significant factor any prospective purchaser will have to consider is the liability that would be assumed in future removal of the Tyonek platform, which now supports the North Cook Inlet field gas operations.

The state will likely insist that liability for the eventual platform removal and environmental remediation be accepted as part of a purchase deal, mainly so the state itself doesn’t get stuck with the costs. Estimates for removal of a Cook Inlet platform range to $50 million, according to sources familiar with the issue.

11/20/2016 - 3:11pm