BP’s departure is cause for reflection among Alaskans who watch the state’s petroleum industry.
The company has been in the state for 60 years, first opening its office in 1959, the year of Alaska statehood. BP led the early exploration of the North Slope and helped make the big Prudhoe Bay discovery in 1969, providing a foundation for our state’s economy.
Many are dispirited over BP’s leaving, which happens next year when the sale of its assets to Hilcorp Energy is completed. It’s important to realize, however, that this is just a transition in our state’s oil and gas industry, a handing of the keys to other players who bring fresh ideas and new investment.
Precisely this happened in 2012 and 2013 when Hilcorp bought out Chrevron Corp. and Marathon Oil in Cook Inlet and then invested to rebuild the Inlet’s aging oil and gas fields. Hilcorp brought new security for natural gas supplies to Southcentral Alaska and substantially increased oil production in the Inlet.
This same script could play out at Prudhoe Bay. There’s still a lot of oil to be developed there.
Still, losing a flagship oil producer and employer like BP after six decades is a bit sobering. It has caused me to reflect on some of BP’s accomplishments, including some things many Alaskans, even many BP employees, are unaware of.
Full disclosure: I worked for BP in the 1970s and early 1980s as one of the company’s public affairs representatives (yes, one of those oil lobbyists), but the experience gave me an unusual inside perspective on things BP accomplished. Of course, having worked for the company does color my perspective, so keep that in mind.
BP arrived in Alaska at a time when the young state’s leaders were welcoming new investment but were also cautious. Alaska’s history with resource extraction by out-of-state interests caused many to be suspicious of large corporations, particularly ones run by people who spoke Texan and wore cowboy boots. Among the skeptics was our first governor, Bill Egan.
BP was looked at a little differently by many. That its executives spoke with different accents and didn’t wear cowboy boots helped. So did the fact that BP was half-owned by the British government, which for many Alaskans set it apart from the Texas crowd. Many also thought BP’s international experience caused the company to regard Alaska differently than other oil companies in Alaska at the time, which were purely domestic. In the early 1960s, Humble Oil had not yet become ExxonMobil, and Richfield Oil had yet to become Atlantic Richfield, for example.
As the 1970s dawned, BP tacked differently than the rest of the industry when it came to working political issues. Early on, the company realized the importance of a settlement of Alaska Native land claims to clear title for a trans-Alaska pipeline corridor and helped nudge others in the industry into helping get the settlement through Congress. Today we have not only the pipeline, but also a group of prosperous Alaska Native corporations employing thousands of Alaskans.
In 1975, when pipeline construction began, a vigorous debate on oil taxes began in the Legislature as Alaskans pondered their share of the oil resource — a debate that continues today. BP was in the trenches on that, along with other companies, but the company also realized the importance of bringing Alaskans into sharing benefits of the industry through jobs and business contracts. BP let the first oil service contract to an Alaska Native corporation in 1975 — it was to NANA Regional Corp. Other contracts to other Native corporations followed.
Soon the “Alaskanization” of the oil service and support contractor community was well along in catering, security, construction and ultimately in drilling and highly specialized technical services like corrosion control. NANA’s 1975 contract with BP for catering, camp services and security continues today.
One interesting initiative by BP in 1979 was bringing five Native regional corporations in as partners in a competitive-bid state offshore lease sale. The Native corporations had small shares, but BP’s intent was to forge local partnerships in working-interest ownership of oil fields, not just contractors or passive royalty owners. The corporations included NANA, Doyon, Bristol Bay Native Corp., Koniag Corp. and Sealaska Corp. The Endicott oil field was discovered and developed on leases won on that sale, and those corporations were full-fledged partners.
BP was always straightforward in this. As the tax battles escalated in Juneau, the company wanted Alaskans in business with it, to help provide political support.
The group of five gradually sold their shares but benefited from production profits for several years. The experience whetted the appetite for doing more oil work, though. CIRI became half-owner of Peak Oilfield Services. It is now 100% owned by Bristol Bay, which had meanwhile become active in oilfield technical services like corrosion monitoring and control.
Doyon has probably the most spectacular success story. Today, Doyon Drilling is one of the top two North Slope drilling contractors and is at the fore of drilling technically challenging long, extended-reach horizontal wells, which many believe will unlock many new oil resources on the slope.
Arctic Slope Regional Corp. wasn’t part of the 1979 deal, but today is an active oil explorer today and a producer at the small Badami field.
BP was a technology innovator, too. The first commercial demonstration of horizontal production wells was done by BP at Prudhoe Bay in the 1980s, paving the use of the technology in shale gas and oil in the Lower 48.
Other companies were technology leaders, to be sure. Arco Alaska led the development of “multilateral” wells, or multiple wells drilled underground off one well to the surface. It was a revolutionary breakthough equal to BP’s horizontal wells.
More recently, ExxonMobil tackled development of the extremely challenging Point Thomson gas and liquid condensate field east of Prudhoe. The project has had setbacks due to the extreme reservoir pressures but ExxonMobil showed that even very large mega-companies can show leadership and be entrepreneurial.
Things have been relatively quiet in recent years for BP in Alaska. The company stopped exploring, admitting that others were better at it, and focused on efficiently extracting more oil from the aging Prudhoe field, essentially exploring for more oil within the oilfield. A few years ago BP sold off several small fields near Prudhoe to Hilcorp, which allowed that company to demonstrate it could make the transition from Cook Inlet to the North Slope.
Meanwhile, it’s been a long ride for BP, and for Alaska. I got to play small roles in some of BP’s initiatives. I’m proud of that.
Tim Bradner is copublisher of the Alaska Economic Report and Alaska Legislative Digest.
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