Marathon Oil Co., not long separated from USX Corp., said Thursday bigger isn’t necessarily better, and plans to gain shareholder value by defining unique niches that promote growth. To that end, Marathon plans to host a trade auction this spring to swap its entire portfolio of oil and gas properties in the San Juan Basin, southwestern Wyoming, south-central and eastern Texas and Louisiana for properties in the Powder River and Permian basins.

The Powder River and the Permian basins were part of what Marathon has identified as its core operating areas, along with the Gulf of Mexico, Alaska, Norway and West Africa, including Equatorial Guinea. Although a timetable on the trading auction is not set, a Marathon spokesman said it will begin soon, with bids accepted until July. The auction could be closed by the end of the third quarter.

In the six core areas, Marathon had a 77% success rate in 2001, with its exploration efforts yielding an average finding cost of $1.73/boe. Executives said Marathon would optimize earnings and cash flow from existing producing assets with a planned 3% production volume growth in 2002, similar to earnings growth in recent years. Marathon also is targeting a reserve replacement of 190% between now and 2004.

At an analyst meeting in New York, CEO Clarence Cazalot said Marathon would not get bigger “for bigger’s sake” because it isn’t necessary. “We’ll play the game differently,” he said, focusing on ways in which it is uniquely advantaged. Along with trading properties, Marathon plans to use partnerships and technology to set it apart.

Natural gas projects also will be its strength, he said, announcing two partnership deals Thursday. One deal proposes building a liquefied natural gas (LNG) regasification and power generation complex near Tijuana in Baja California with project partners Pertamina, Golar LNG Ltd. and Grupo GGS S.A. de C.V. The complex, which would be developed on the Pacific coast south of Tijuana, has a proposed start-up of 2005, with capacity to regasify up to 750 MMcf/d for regional use as well as export to Southern California. A 400 MW gas-fired power plant also would be constructed on the site (see Daily GPI, March 1).

Another partnership announced, the Bacton Pipeline Project, would add a North Sea natural gas pipeline stretching 675 kilometers to a terminal in England with a capacity to move up to 900 MMcf/d.

“In both of these projects, Marathon is serving as an ‘energy architect’ by assessing market opportunities, determining how our company can apply its skills and resources, and then assembling the strategic partnerships necessary to capture and optimize the value of the opportunities,” said Cazalot.

Cazalot said Marathon would adopt a business model that “enables our company to use its size as an advantage — linking our technical strength, commercial skills and international stature with a willingness to do things differently, and to do so with the speed and agility of a small enterprise.”

“It’s all about getting bigger and better in fewer places,” said Steven Hinchman, senior vice president of production operations.

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