Energy producer and distributor BP has decided to abandon its Alaskan enterprises, selling off Alaskan assets to Hilcorp, the state’s largest private oil and gas operator. The purchase is priced at $5.6bn and includes BP’s entire upstream and midstream business in the state, as well as the company’s Alaskan pipeline systems.

BP’s CEO Bob Dudley has described the company’s history in Alaska, claiming that the state has been “instrumental in BP's growth and success for well over half a century”, and that BP has made “significant contributions [...] to Alaska's economy and America's energy security” in return. But the company has expressed interest in other opportunities that more closely align with its long-term investment strategy. This deal contributes to BP’s $10bn divestment programme which BP hopes will improve its balance sheet, by providing funds for future investments. These future investments could continue to support BP’s oil and gas ventures, but some have speculated that the divested funds may go toward the company’s continued expansion into the renewable sector. BP recently struck a deal with Chinese transportation service Didi Chixing to develop electric vehicle charging infrastructure throughout China, reported on here. The company’s Lightsource BP programme has also been expanding throughout Brazil, focusing on the development of solar energy farms, reported on here.

Rumours of a BP exit from Alaska had been circulating among oil industry insiders before the decision was announced. The company had almost completely ceased its explorations for new oil in the state and had begun selling other Alaskan assets in recent years. Despite BP’s long history in Alaska, the state currently represents only about two per cent of the company’s global portfolio. Older oil fields and production sites often come with large overhead costs, creating a disincentive for the company’s continued operation. Experts predict this divestment to help improve BP’s efficiency figures, depending on how the funds are reallocated.

Hilcorp on the other hand, is known for reviving production in older oil and gas fields, like the fields of south-central Alaska’s Cook Inlet that the company acquired in 2012 and revamped, making it the largest oil and gas operator in the region. Hilcorp hopes to continue this trend throughout the rest of Alaska following this sale.

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