Reaction generally favorable to BP Amoco-Phillips deal

Posted: Thursday, March 16, 2000

ANCHORAGE (AP) -- Phillips Petroleum Co.'s purchase of Arco Alaska Inc. generally met with approval in the state, though some watchers offered a more guarded outlook until they learn more about Phillips' North Slope plans.

''(Phillips) has a long history in the state, great knowledge of Alaska conditions and has been a good corporate citizen for decades,'' said Sen. Frank Murkowski. ''Alaskans appear to have struck paydirt.''

''The takeover of Arco's assets by Phillips Petroleum needs careful scrutiny before we know it is in Alaska's best interests,'' said Jim Sykes, executive director of the Alaska Public Interest Research Group.

''It will be a great victory for the Alaska people if Phillips turns out to be a real competitor.''

BP Amoco PLC said Wednesday that it will sell Arco Alaska to Phillips for $7 billion to clear the way for Federal Trade Commission approval of BP's acquisition of the rest of Atlantic Richfield Co.

''It's time to bring this long, drawn-out effort to a close,'' said BP deputy chief executive Rodney Chase, dispatched from London this week to nail down the deal with Phillips.

When the BP-Arco merger was announced last spring, Alaska was hailed as a key reason for making the deal.

The companies said hundreds of millions of dollars could be saved by unifying Prudhoe Bay -- half the field is now run by BP, the other half by Arco -- and combining the companies' natural-gas reserves would help bring them to market faster.

But the FTC said Alaska was also the key reason it went to court to stop the deal. The agency said the combined company would control too much of Alaska's production and would wield too much clout in the West Coast gasoline market, which is heavily dependent on Alaska oil.

Chase said the company decided the benefits outside Alaska from the Arco purchase made it worthwhile to shed Arco Alaska.

''Obviously, it's a very different outcome than we envisaged,'' he said. ''We believe Alaska's oil and gas future is brighter today than it was a year ago.''

Jim Mulva, Phillips chief executive, agreed on the state's appeal, saying his company would spend more than $500 million on Alaska projects this year.

''Looking at Arco Alaska's business, we see unlimited potential,'' he said. ''Our goal is to combine Phillips' and Arco's plans to grow production by aggressively pursuing exploration and development opportunities.''

Phillips, based in Bartlesville, Okla., would get Arco's daily production of about 325,000 barrels, along with the lion's share of the 425-million-barrel Alpine field due to start flowing later this year.

The Alaska sale also includes a 22 percent interest in the trans-Alaska oil pipeline, six oil tankers and three others being built, and more than 12 trillion cubic feet of natural gas.

Phillips, the nation's sixth-largest oil company, already owns 70 percent of a liquefied natural gas plant in Nikiski that exports to Asia. The company also has a small piece of the Prudhoe Bay field.

Mulva said Phillips would hire Arco Alaska's workforce to take advantage of their North Slope knowledge. The original BP Amoco-Arco deal called for roughly 400 layoffs as the combined company consolidated operations.

The Arco workers had been living with uncertainty since last April, as the chess match between BP Amoco and FTC dragged on. The workers didn't know whether to take new jobs or wait for a severance package.

''The good news is that things are happening,'' said Candy Kern, a systems analyst in Anchorage.

Tom Winter, who works at the Kuparuk oil field, had wanted to retire this year after 17 years at Arco Alaska and move closer to his aging parents in Iowa. Now it seems those plans are on hold.

''Looks like I'm going to be a Phillips employee, and I'm going to have to keep working,'' Winter said with a smile.

Legislators were also mixed on the BP-Phillips news.

House Speaker Brian Porter, R-Anchorage, said it may be premature to get too excited about the proposal.

''The Legislature needs an opportunity to examine the details of the settlement and Phillips' commitment to Alaska,'' he said.

Rep. Beth Kerttula, D-Juneau, said her initial response was favorable, though she too wants to read the details.

''I want to see exploration in Alaska, rather than sitting back and harvesting,'' Kerttula said. ''I never thought we'd get this far and it's really good. It's really gratifying.''

Senate President Drue Pearce, R-Anchorage, slapped at Gov. Tony Knowles, who joined BP Amoco's team in fighting FTC opposition to the Arco purchase. Knowles favored a deal he made with BP Amoco that called for the company to give up 175,000 barrels of daily Alaska production.

''It's ironic that the FTC brokered a more beneficial deal for Alaska in a matter of weeks than the (Knowles) administration was able to obtain in the year since the merger was first announced,'' Pearce said.

Knowles on Wednesday fended off several questions on whether the sale of Arco Alaska in its entirety was better for the state than the concessions he extracted from BP Amoco.

''What happened today is good for Alaska,'' Knowles said.

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