BP Amoco has taken a big step towards removing the obstacles to its takeover of Atlantic Richfield, agreeing to sell Arco's assets in Alaska to Phillips Petroleum.
American competition authorities had threatened to block the $27bn acquisition because they feared for the impact of the deal on the US west coast energy market. Most Alaskan oil goes to refineries on the west coast, where petrol prices are the highest in the nation. Legal action was to begin next week.
But the Federal Trade Commission said yesterday it now wanted to adjourn the case. Richard G. Parker, the head of the FTC's Bureau of Competition said: "In light of the substantial and constructive proposals made by the defendants, all parties have agreed to seek adjournment of the federal court proceedings ... in order to conduct negotiations."
BP Amoco and Arco have agreed to sell the Alaskan assets for an estimated $7bn to Phillips, an Oklahoma-based producer, the companies said. BP Amoco had already agreed, in a separate deal with the Alaskan government, to dispose of some assets. Together, Arco and BP Amoco would have had 70 per cent of oil production in Alaska's North Slope.
Peter Hitchens, an oil analyst at Williams de Broe in London said "This will probably be enough to win FTC approval [Alaska] has been the major hurdle that the FTC has been worried about. [Now] they won't have a leg to stand on."
Rodney Chase, BP Amoco's Deputy Chief Executive, flew to Alaska on Tuesday to discuss the plan. It is still no certainty that the Arco deal will go through: the FTC had been reportedly worried about whether Phillips, which has few west coast operations, would be able to compete. But the announcement gave a big boost to BP Amoco stocks, as analysts anticipated a solution to what had been a tricky impasse.
It has been a busy week for BP Amoco, which on Tuesday said it had agreed to buy Burmah Castrol, the lubricants company, for £3bn. Separately, BP Amoco settled a series of lawsuits over cancer suffered by former employees who worked at Amoco's chemical research facility in the 1970s and 1980s.Reuse content