BP: No gas marketing information to share

  • By ELWOOD BREHMER
  • Tuesday, September 6, 2016 9:59pm
  • News

In a cover letter to state Division of Oil and Gas Director Corri Feige about the latest plan document submitted Sept. 1, BP Alaska Reservoir Manager Scott Digert wrote that BP, the state and the other Prudhoe Bay working interest owners — notably ConocoPhillips and ExxonMobil — have a confidentiality agreement in place for the Alaska LNG Project that all are currently participating in.

Additionally, BP and the state have a separate bilateral confidentiality agreement that prohibits the company from sharing any information it has about efforts to market Prudhoe Bay natural gas as the division has requested.

Those confidentiality agreements and antitrust laws prohibit BP from “requesting, possessing or discussing the Prudhoe Bay Unit working interest owners’ proprietary marketing information,” Digert wrote.

The “Major Gas Sales” section of the revised 2016 Prudhoe Bay Plan of Development begins with the two paragraphs that comprised the entire section in the original document submitted to the division March 31, which first state that selling gas from the North Slope field remains contingent upon having infrastructure to sell the gas into. Also, the Prudhoe owner companies will keep evaluating plans to “further optimize gas and oil recovery, and to address facilities, equipment, wells and operational changes to position for major gas sales.”

BP has signed confidentiality agreements for technical information related to gas production from the unit and made that available to third parties to further “potential gas-related projects,” according to the plan of development.

The third and last paragraph — new in the revised document — describes the company’s limitations.

“BP Exploration (Alaska) Inc., as Prudhoe Bay Unit operator, is not involved in marketing of hydrocarbons produced from the unit. Such action is outside the authorized scope of operations conducted by the Prudhoe Bay Unit operator and is prohibited under the Prudhoe Bay Unit Agreement executed by the State of Alaska and the Prudhoe Bay Unit working interest owners,” it states. “Each Prudhoe Bay Unit owner takes and markets hydrocarbons allocated to that owner and, due to competition and anti-trust considerations, the unit operator cannot and does not solicit, accept, or receive proprietary marketing information from any Prudhoe Bay Unit owner.”

BP, as the unit operator, manages Prudhoe operations for the working interest owner companies with a stake in the field. Its first 2016 Prudhoe development plan document submitted March 31 was deemed incomplete because it did not contain detailed marketing information about the company’s efforts to sell gas from the field.

Prudhoe holds roughly three-quarters of the gas available on the Slope to sell through the prospective $45 billion Alaska LNG Project.

In January, now retired DNR Commissioner Mark Myers sent a letter to all unit operators in the state notifying them the new information would be requested in subsequent unit development plans. The plans have historically been mostly technical documents to inform the state about drilling plans, facility operations, anticipated production and the like.

When the Division of Oil and Gas ruled the first Prudhoe plan incomplete, it set off a back and forth of correspondence between the division and the company, with both sides reiterating their stance. ConocoPhillips supported BP in a May 4 letter to the division.

The June 30 deadline for an approved Prudhoe plan eventually came and went and the division extended the 2015 plan through Nov. 1 and gave BP until Sept. 1 to submit a revised version.

ExxonMobil Production Co. Asset Manager Gilbert Wong also sent a letter to Oil and Gas Director Feige stating the company is in line with the other producers in believing the March 31 plan satisfies state regulatory requirements.

“Any discussions regarding marketing and sales of production must occur directly between individual sellers and potential buyers under strict confidentiality consistent with applicable legal considerations and agreements already in place. In this regard, both the Prudhoe Bay Unit Agreement as well as confidentiality agreements entered into by the state jointly or individually with (the working interest owners), prohibit sharing or discussing the information currently requested by the division,” Wong wrote.

Gov. Bill Walker indicated in a Tuesday interview prior to release of the latest documents that he had not seen them, but noted the state is working “marketing concepts” with the producer companies under a new, state-led structure for the Alaska LNG Project.

Walker said the goal is to reach an agreement on the Prudhoe plan.

“I don’t think anybody’s trying to take it off the rails in any way,” the governor said Tuesday.

In a July interview with the Journal, Walker said that because the state is a partner in the Alaska LNG Project, and is dependent upon the companies to produce its share of the North Slope gas, it needs to know what they are doing in preparation to sell their gas so the state can effectively market its share.

At the time he said he was in discussions with BP’s top Alaska officials to find a way to share what the state wants while addressing the companies’ concerns.

While talking with the Journal Tuesday morning, Walker said that “since that discussion began the world has changed a little bit on the gasline, in my opinion, in a good way. I think that, in some respects, helps.”

BP threw its support fully behind the state-led Alaska LNG Project that has been championed by Walker’s administration during an Aug. 25 joint House and Senate Resources Committee hearing on the project.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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