ConocoPhillips wants to sell a stake in some of its Alaska oil projects, in hopes of offsetting risk and sharing the expense of costly investments it’s planning in the state over the next decade, the company announced this week.
The package for sale includes old, new and unbuilt projects that represent most of Conoco’s holdings in Alaska, with the notable exception of the company’s 36% share of the massive Prudhoe Bay field, America’s largest.
Among the assets on the block: the Kuparuk River Unit, which is Alaska’s second-largest oil field and has been operating for decades; the newer Alpine unit to the west, which is still expanding; and the undeveloped Willow prospect in the National Petroleum Reserve-Alaska.
Sometimes oil companies sell off projects if they aren’t measuring up to expectations. Earlier this year, BP announced it would sell all of its Alaska assets to a smaller company, Hilcorp. But Conoco’s sale is not about a lack of confidence in its Alaska projects, according to spokeswoman Natalie Lowman. Instead, she said it stems in part from Conoco’s plan to invest billions of dollars to expand and develop an array of projects in Alaska.
The company aims to spend $11 billion on its core assets in Alaska over the next decade, not including the estimated $5 billion that would be needed to bring the major Willow project into production.
“We have a lot of exciting work that we are planning to do on the North Slope, and it costs a lot of money,” Lowman said in an interview Wednesday. “So what we’re looking for is a co-venturer, a company that shares our vision for increasing production on the North Slope.”
Conoco currently owns 100%, or close to it, of the assets up for sale, and the company says it’s unusual for it to own that much of a stake in its projects. Oil companies often split project ownership into chunks to help share costs: Conoco owns about one-third of the Prudhoe Bay field, America’s largest, with BP and ExxonMobil also holding stakes, for example.
The company is not looking to sell more than one-fourth of the assets, Lowman said, which will leave it in control. And it wants to find a buyer that will be similarly enthusiastic about making the investments needed to move the projects forward.
The announcement did not make a big splash in Alaska’s oil industry, and one analyst said the move does not signify much of a change in Conoco’s view of the state. Some of Conoco’s holdings in Alaska that started as “bite-sized” projects have now grown into bigger undertakings, said Rowena Gunn, who works with energy research firm Wood Mackenzie, in an email.
“Alaska represents a good chunk of ConocoPhillips’ global portfolio, so I think they have taken this decision in order to spread the risk and cost of these projects,” she said. “They will still retain being the largest shareholder and operator of assets.”
Gunn declined to speculate on which oil companies could be interested customers, but she did say that the sale could bring a new player to the North Slope.
The asking price is not going to be made public, Lowman said.
“This is a large commercial negotiation,” Lowman said. “And I think those people who are interested will know how to find us.”