Phillips makes own mark on North Slope with Alpine start-up, NPR-A strikes.

Phillips Alaska Inc., inheritor of the ARCO Alaska Inc. legacy and assets, has quickly made its own mark in assuming ARCO's mantle as the largest oil producer in Alaska.

The Alaskan unit of Phillips Petroleum Co., within a year of its acquisition of ARCO's Alaska assets, has managed to start up the North Slope's newest major field and production hub at Alpine, made the first hydrocarbon discoveries in the National Petroleum Reserve-Alaska since the NPR-A was reopened to exploration, and embarked upon its own ambitious exploration program on the slope.

The Alpine and NPR-A finds point to an exciting new stratigraphic play, driven by advances in 3D seismic technology, that has revolutionized explorationists' thinking about the prospectiveness of the otherwise maturing North Slope province.

At the same time, Phillips has made commercialization of its North Slope natural gas reserves a priority by participating with other top slope producers in feasibility studies of proposed pipelines and other options for monetizing the slope's stranded gas.

And the Bartlesville, Okla., company recently initiated operation of its new double-hulled crude oil tanker fleet built specifically for the Alaska trade (see related story, opposite page).

Phillips completed acquisition of ARCO's businesses in Alaska in August 2000 for $965 million. The acquisition added 2.2 billion boe of oil and gas reserves to Phillips's base.

Its presence far predates the ARCO acquisition, however. Phillips was the first company allowed by the federal government to explore for oil in Alaska, in 1952. It has long been a presence in the Cook Inlet region, where it operates Beluga and North Cook Inlet gas fields. And the company was the sole exporter of LNG in the Western Hemisphere with the Kenai Peninsula LNG complex it still operates after 30 years--until a few years ago, when Trinidad and Tobago started exporting LNG.

Phillips Alaska assets

In acquiring the ARCO Alaska assets, Phillips increased its production by 75%, more than doubled its reserves, and added more than 1 million acres to its exploration portfolio in the state.

Following the acquisition, a lawsuit by ExxonMobil Corp. forced a realignment of interests in the Prudhoe Bay Unit (PBU) and switched operatorship to a single company, BP PLC. Previously, BP and ARCO had each operated half of the field. BP's acquisition of ARCO had state and federal authorities concerned about the concentration of North Slope assets under one company, so BP was obliged to sell the ARCO Alaska assets.

While BP was named sole PBU operator, Phillips retained operatorship of Kuparuk River and Alpine oil fields. With the ARCO deal, Phillips acquired more than 8 tcf of net natural gas reserves, making it a key player, along with fellow Prudhoe gas cap interest owners BP and ExxonMobil, in any plans to commercialize North Slope gas.

In addition to its 36% interest in the Greater Prudhoe Bay Unit, Phillips holds interests in the Prudhoe Bay area satellites Northwest Eileen, Aurora, Polaris, and Midnight Sun. Phillips also operates West Sak heavy oil field and the Greater Kuparuk Area satellites Tarn, Tabasco, and Meltwater. And the company holds a 23.7% interest in the Trans-Alaska Pipeline System (TAPS).

Phillips strategy

Phillips's acquisition of ARCO Alaska assets, apart from it being the biggest and most company-transforming transaction in its history, is a centerpiece of a new corporate upstream strategy.

That strategy calls for Phillips to build what …