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Unitization of Oil Company Interests in Prudhoe Bay Oil Field
Effective April 1, 1977, to save costs and to enhance
operating efficiencies, Exxon and the other oil companies owning
the oil exploration and production leases in the Prudhoe Bay
field entered into a unitization or partnership agreement with
the State of Alaska (Unit Agreement) under which they unitized
their oil exploration and production leases into a single
operating partnership, the Prudhoe Bay Unit (the PBU).
The Unit Agreement divided the Prudhoe Bay oil field into
two operating areas–-the Western Operating Area to be operated by
BP and the Eastern Operating Area to be operated by ARCO.
Also, effective April 1, 1977, the PBU partners entered into
the PBU Operating Agreement (Operating Agreement), which
established how the PBU would be operated and how costs would be
shared among Exxon and the other oil companies with ownership
interests in the PBU. As indicated, under the Unit and Operating
Agreements, Exxon’s share of the total costs of constructing and
operating the Prudhoe Bay oil field was approximately 22 percent.
When the PBU terminates, the individual leases to the oil
companies will remain in force for at least 1 year or for as long
as the lessee oil companies continue production of oil on the
leases in paying quantities. The separate oil companies may take
over and continue to operate wells and equipment on their leases
after the Unit Agreement terminates. As permitted by
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