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Wednesday, 2 February, 2000, 21:36 GMT
BP deal for Arco blocked

North Sea oil BP Amoco owns oil fields around the world

The ambitious expansion plans of BP Amoco, the world's second largest oil company have been blocked by the US government.

The Federal Trade Commission has voted by 3-2 to block its plan to take over US oil company Arco for $30bn (13.8bn). It will try and seek a court injunction later this week.

The FTC says that the merger would raise crude oil prices and increase gasoline prices on the West Coast of the United States.

When 74% of the oil is owned by one company, that's enough to create worries
Bill Lockyear, California Attorney General
But John Browne, BP's chief executive, has vowed to fight the decision in the courts, triggering the biggest anti-trust battle in the United States since the break-up of John D. Rockefeller's Standard Oil in 1911.

He says he is "surprised and disappointed" by the decision. "We have been and remain willing to discuss any reasonable options that might lead to a negotiated settlement," he added.

We have been and remain willing to discuss any reasonable options that might lead to a negotiated settlement
BP Amoco
The Federal Trade Commission is worried that if the merger goes through, BP Amoco would control too much of the huge Alaska oil fields, and dominate the West Coast refinery market.

Oil prices are already higher in California than elsewhere in the US, a politically sensitive issue, and the FTC and the State of California fear that, with 40% of the oil to refineries supplied from Alaska, BP Amoco could raise prices and stifle competition.

Arco headquarters, Los Angeles Arco is the biggest oil company on the US West Coast

"When Alaska North Slope oil ... that is, 74% of the oil there, is owned by one company, that's enough to create worries," California Attorney General Bill Lockyer said.

Although the FTC has approved the merger of Exxon and Mobil, creating the world's largest oil company, there is growing concern that just four major oil companies now dominate the US retail market.

BP Amoco presses ahead

BP Amoco has vowed to press ahead with the merger plan, despite the opposition of the FTC.

It argues that there is no separate market for oil on the US West Coast.

"Any suggestion that there is a special West Coast market is not true. It is one world, one oil price," BP said.

It has tried to reached agreement with the state of Alaska to sell off enough of its assets on the North Slope, the main oil producing region, to satisfy the state regulators.

It has agreed to reduce its share of the North Slope from 34% to 15% and says it will sign 10 year price supply agreements.

"Because of uncertainty over this merger, work on the North Slope ground to a virtual halt last year and future exploration and development stands to be delayed," said Alaska's governor Tony Knowles.

However, after eight months of talks, it has failed to convince the US federal authorities of the desirability of its plans.

The move puts Atlantic Richfield (Arco) in a difficult position. It has sought the merger as it believed itself to be too small to survive independently.

BP Amoco overtook its longstanding Anglo-Dutch rival Shell last year as Europe's biggest oil company, and had hoped to use this deal to confirm its position as the oil company with the largest reserves.

It says the merger will generate $1bn in savings each year.

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See also:
10 Aug 99 |  The Company File
BP Amoco reports gushing profits
31 Mar 99 |  The Company File
Oil merger fever
01 Apr 99 |  The Economy
Lubricating the oil industry
30 Dec 98 |  The Company File
Green light for BP Amoco
11 Aug 98 |  The Company File
From Anglo-Persian Oil to BP Amoco
26 Dec 99 |  Business
What flows up must flow down

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