Oil and gas giant BP has agreed to sell its entire upstream and midstream business in the US state of Alaska to Hilcorp Alaska for $5.6bn (£4.56bn).

The sale includes BP Exploration (Alaska), which holds the company’s upstream oil and gas interests in Alaska, and the stake of BP Pipelines (Alaska) in the 1,287km long Trans Alaska Pipeline System (TAPS).

The oil and gas giant is currently the operator of the onshore Prudhoe Bay oilfield with a stake of 26%. The Prudhoe Bay oilfield, which began production in 1977, has so far yielded more than 13 billion barrels of oil.

Located on Alaska’s North Slope, Prudhoe Bay is expected to further produce more than one billion barrels.

Other Alaskan upstream assets to be sold by BP

Under the upstream part of the deal, the oil and gas major will also be offloading 50% stake in Milne Point, 32% stake in Point Thomson, 50% stake in Liberty project, and non-operating interests in exploration leases in Arctic National Wildlife Refuge (ANWR).

The company expects its net oil production from Alaska to average around 74,000 barrels a day in the current year.

Midstream part of the deal

Under the midstream part of the transaction, the company will be divesting 49% stake in the Trans Alaska Pipeline System, 49% stake in the Alyeska Pipeline, 32% stake in the Point Thomson Export Pipeline, and 50% stake in the Milne Point Pipeline. The midstream assets will be acquired by Harvest Alaska, an affiliate of Harvest Midstream, which in turn is an affiliate of Hilcorp Energy.

The Trans Alaska Pipeline System transports oil drawn from the North Slope of Alaska, which includes the Prudhoe Bay oilfield, to the Port of Valdez.

Also part of the deal is BP’s 25% stake in the Prince William Sound Oil Spill Response Corporation.

The transaction is being carried out by the company to support its two-year $10bn divestment programme, while further consolidating its balance sheet. It also allows the company to explore new advantaged opportunities for its portfolio within its financial framework.

BP group chief executive Bob Dudley said: “We are extraordinarily proud of the world-class business we have built, working alongside our partners and the State of Alaska, and the significant contributions it has made to Alaska’s economy and America’s energy security.”

“However, we are steadily reshaping BP and today we have other opportunities, both in the US and around the world, that are more closely aligned with our long-term strategy and more competitive for our investment.”

The transaction, which is subject to state and federal regulatory approval, is likely to be closed next year.