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. Last Updated: 07/27/2016

FTC Reveals Concerns Over Arco to BP Amoco




LONDON -- U.S. antitrust watchdog the Federal Trade Commission has approached BP Amoco PLC outlining for the first time specific areas of its concern about the oil giant's planned purchase of Atlantic Richfield Co., a BP Amoco spokesman said Friday.


"The FTC did make an approach and have indicated there are some areas they would like to examine in more detail," the spokesman said.


He spoke as BP Amoco shares jumped more than 3 percent in early trade, partly on revived hopes the $26.8 billion deal may be spared a prolonged court battle with the FTC. BP Amoco hopes to make $1 billion a year of cost savings through the merger along with other potential synergies.


"Discussions include the process of litigation and an exploration of whether litigation can be avoided," the spokesman said.


But in a reference to a move the company made earlier this month to force a decision from the FTC on whether to clear the deal or go to court to block it, he added that "the 20-day clock is still ticking, and it ends on Feb. 3."


The FTC declined to comment in the United States on Thursday after BP Amoco first commented on discussions aimed at avoiding litigation, maintaining its official silence on the subject.


Sources familiar with the body's thinking say it is concerned that domination of Alaska crude output will reduce gasoline price competition on the U.S. West Coast, whose refineries rely on the state for 40 percent of supplies.


BP Amoco declined to say what was in the approach from the FTC, and would not comment on a report in the U.S. oil newsletter Oil Daily that said the FTC move may simply be internal maneuvering - an attempt by its chairman, Robert Pitofsky, to show he has explored all avenues.


Pitofsky needs the support of at least two of the other four members on the commission to take BP Amoco to court.


According to Oil Daily, an agency has told BP that if it wants a negotiated settlement it should be prepared to wipe out what it is picking up in Alaska - some 350,000 barrels per day of the combined groups' 800,000 barrels of production.


Analysts have long felt that BP Amoco would be prepared to do exactly that, though industry sources have insisted that it considered Prudhoe Bay, the jewel of Alaskan output where both companies work, as nonnegotiable.


BP Amoco has already agreed to divest 175,000 barrels in a deal with Alaska governor Tony Knowles, who backs the takeover. On Jan. 13 when it decided to force the FTC's hand, it revealed that it had offered the U.S. body the allocation of a further 210,000 barrels a day to third party buyers under long-term contracts. "Only about $200 million of the cost savings come from Alaska anyway and they'd be able to retain some of those, so 85 percent of the $1 billion of cost savings they'd be able to retain even if they did have to sell every barrel of Arco's Alaskan output," Lucy Haskins, analyst at Commerzbank, said.